Is it safe to own tech stocks after the positive CPI print?
It’s not the scariest thing in the world anymore to start selectively returning to the beaten down tech stocks, says Shannon Saccocia – the Chief Investment Officer of SVB Private.
Saccocia’s bull case for the tech stocks
Saccocia admits that one month of positive data on the inflation front (read more) is probably not enough to call an all clear on the tech stocks, especially when the federal funds rate is still expected to go beyond 5.0% in 2023.
In fact, her bull case is pretty much predicated on valuation and growth.
Simply put, Saccocia is taking a broader view on the quality tech names that are now trading at a deep discount and recommends focusing on “time in the market” rather than “timing the market”. On CNBC’s “Closing Bell: Overtime”, she said:
You’re assuming that there should be no premium afforded to these companies but their ability to grow revenue, grow top-line consistently at an above market rate is still in place, even if the above market rate is lower than it was a year ago.
Layoffs will help the tech stocks as well
Tech companies, in recent weeks, have announced sizable layoffs that will contribute to increasing unemployment – an indicator that helps the Fed determine its monetary policy.
But Saccocia is convinced the job cuts will help the tech companies more directly as well.
Think about the margin improvement, the capital allocation, the discipline that’s being put into place. Coupled with continued above market growth rates, there could be a real inflection point for tech in the next 18 months or so.
“XLK” – the Technology Select Sector SPDR Fund is down nearly 25% for the year at writing.
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