Tech is set for one of its best quarters, thanks to the U.S. Fed
BNN Bloomberg
The Nasdaq 100 is heading for its second-best quarter in a decade — and it has the U.S. Federal Reserve’s recent largess to thank for its gains.
The tech gauge soared 17 per cent in the first quarter, buoyed by the Fed’s loosening of its balance sheet after Silicon Valley Bank’s collapse earlier this month led to worries about monetary conditions tightening. In the past decade, there’s only been one better quarter for the Nasdaq: between April and June 2020, when it rose more than 30 per cent as, again, the Fed was pumping liquidity. Then it was to combat the effects of the pandemic.
The chart below shows how powerful Fed easing can be for tech shares, which struggled last year when the central bank began tightening. The Nasdaq’s latest 10 per cent leg up coincided with the Fed’s balance sheet expanding by US$400 billion. It’s clear that the tech rally will continue if the Fed continues to boost liquidity.
It isn’t just in the U.S. that tech is gaining from the Fed’s easing. Global tech stocks have outperformed banking shares since early March, after largely moving in tandem last year. Banks are down, while tech is rising.
