Tech shares have been more susceptible to rapidly shifting sentiment in the bond market as the Fed aggressively raises interest rates to counter inflation
Analysts have taken an especially aggressive hand with companies in the tech sector when evaluating their earnings estimates.
“We continue to believe we are entering the worst semiconductor downturn in a decade given the recession and inventory build,” Citigroup analysts wrote in a note to clients on Aug. 30. The analysts projected that the PHLX Semiconductor Index would fall another 25%. The recent selloff—and late-week rally in tech—has led some investors to question whether the worst of the declines are over after an already punishing year. Much of the debate around tech’s performance hinges on the path of Treasury yields in the coming months.
Goldman Sachs analysts recently suggested that could lead to a repeat of 2019, when shares of growth stocks outperformed their value counterparts as the Fed shifted to cutting rates after steadily raising them. That said, the bank said it is still expecting shares of value companies—traditionally considered those that trade at a low multiple of their book value, or net worth—to shine.
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