Citi strategists see even more losses ahead for growth stocks
BNN Bloomberg
Growth stocks, including the battered tech sector, will likely remain under pressure as central banks tighten monetary policy, driving yields higher, according to Citigroup strategists.
Stocks that are valued on future earnings growth, and especially tech, have been leading the selloff in global equities over the past weeks. As the Federal Reserve embarks on interest rate hikes to tame surging inflation, expensive growth shares have suffered as higher rates mean a bigger discount for the present value of future profits. This marks a shift in investor outlook after tech stocks had been some of the market’s best performers for years.
Citi strategists prefer cheaper, so-called value stocks, according to a portfolio they’ve modeled to protect against rising real yields. They also favor UK and emerging market stocks over the US and continental Europe.
“Any stabilization in nominal yields should eventually help to stabilize real yields and hence equity valuations,” they said.
