Are mega-cap technology names still a good bet for 2022?

The mega-cap technology names like Amazon.com Inc and Meta Platforms Inc have been rather dull in recent weeks, and Livermore Partners’ David Neuhauser says the underperformance has indications for investors on what to expect from 2022.

Neuhauser’s remarks on CNBC’s ‘Squawk Box Europe’

Neuhauser sees several factors, including new variants of the Coronavirus and supply constraints, which could keep inflation above trend, making up for a case to shift away from the growth stocks. On CNBC’s “Squawk Box Europe”, he said:

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The new COVID variants and supply bottlenecks will lead to a higher sustained inflation, and so, our view is that you want to own hard assets and shift away from the growthier areas of the market like technology.

The U.S. Bureau of Labour Statistics on Friday said inflation continued up for the sixth consecutive month in November. The annual gain in consumer prices last month was the largest the country has seen since 1982.

Tech has been resilient, why is this time any different?

Neuhauser agreed that big-cap technology stocks have been a safe haven for investors amidst the global pandemic. He, however, reminded that much of it was related to economic growth, which still looks unimpressive minus the fiscal and monetary stimulus.

In the past, we’ve had a Fed that always had the markets’ back. But that dynamic is now changing. We’ve seen that sentiment shift in the past several weeks, and looks like it will continue.

Simply put, economic relief on top of monetary policy leniency kept the market going.

But now that the Federal Reserve is set to start tapering this month and is under a lot of pressure to tighten its monetary policy amidst decades-high inflation, it’s rather difficult making a convincing case for the mega-cap tech names for 2022.