Tech stocks unravel while banks are hot in 2022 market rotation
BNN Bloomberg
Technology stocks are out of favor, while previously shunned bank shares are popular again, as a persistent jump in bond yields is turning markets upside down this year.
Technology stocks are out of favor, while previously shunned bank shares are popular again, as a persistent jump in bond yields is turning markets upside down this year.
The ongoing rout in tech stocks -- a no-brainer pick for more than a decade -- looks to be more than a short-term pullback: Bank of America Corp.’s January global fund manager survey showed that net allocation to the sector fell 20 per cent month-over-month to 1 per cent, the lowest since 2008. At the same time, overweight positions on bank stocks rose to 41 per cent among BofA’s clients, closing in on a record set in October 2017.
“Central bank tightening remains the #1 risk to markets in 2022,” strategists led by Michael Hartnett wrote in the survey. That’s bad news for expensive technology stocks that are valued on future growth expectations and good news for bank stocks, which have suffered for most of the past decade amid ultra-low or negative yields.
The stampede out of tech continued on Tuesday, with the Nasdaq 100 falling as much as 2 per cent while yields on U.S. 10-year Treasury notes hit a two-year high of 1.85 per cent. The tech-heavy Nasdaq is now down 6.2 per cent this year, while the KBW Bank Index of U.S. lenders has jumped 10 per cent.
