March 29, 2023
“It’s a mistake for people to view tech as a safe haven in this environment,” Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, told MarketWatch via phone. He said the fundamentals of tech firms are deteriorating as demand starts to soften during a potential economic slowdown.
“That’s why tech companies are laying people off aggressively. They can get away with fewer employees now that demand is less, but they must realize their revenues aren’t growing. They have to cut their expenses.”
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1. Michael Landsberg, Chief Investment Officer at Landsberg Bennett Private Wealth Management, suggests that it’s a mistake to view tech as a safe haven in the current environment. He points out that tech firms are facing deteriorating fundamentals as demand begins to soften alongside the onset of a potential economic slowdown. Tech companies are aggressively laying off staff as revenues cease to grow and expenses need to be cut.
2. Investors are viewing tech stocks as a safe haven due to the volatility in the banking sector, notably due to the collapse of Silicon Valley Bank. However, analysts warn that this could be a mistake as the fundamentals of the tech sector have deteriorated since last year.
3. Following the bank’s collapse, the S&P 500 index’s communication-services sector rose 5.6%, and the information-technology sector gained 6.3%. Tech giants like Apple, Meta Platforms, and Alphabet have seen significant stock increases.
4. The tech sector has emerged as a reliable place for investors due to its strong cash-flow generation and robust profit margins. Investors feel safer in the industry leaders, and analysts are starting to question whether these are growth stocks or value stocks.
5. A recent pullback in U.S. bond yields and hopes that the Federal Reserve’s monetary policy tightening cycle is nearing its end are also propping up the prices of tech stocks. However, a rise in interest rates can make tech stocks less appealing compared to bonds and their increasing yields.
6. The tech sector’s valuation remains high, and liquidity is tightening, which could negatively affect the sector. Corporate profits are showing significant declines across all tech and tech-related sectors, and the sector is still one of the most concentrated parts within the U.S. market.
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