Stock-market investors should not blindly follow the established narratives suggesting rising Treasury yields usually spook technology and growth stocks but...
Stock-market investors should not blindly follow the established narratives suggesting rising Treasury yields usually spook technology and growth stocks but focus on underlying economic trends which are the real driver, market analysts say.
Technology stocks continued to outperform in the past week even though hotter-than-expected U.S. inflation reports and strong retail-sales data have pushed up expectations for how much higher the Federal Reserve will need to raise borrowing costs to prevent price pressures from strengthening. Traders of Fed-funds futures priced a growing chance of a half-percentage-point rate hike from the central bank in March, which would take the policy rate to between 5% and 5.
“This thing about narratives is completely understandable, but sometimes the market will take existing narratives as gospel, as truisms, and the interest rates and growth stocks and technology stocks is a classic example, and it will be right more often than not, but it’s not set in stone,” Roberts said in a follow-up interview with MarketWatch.
“That’s the regime shift, the changing story that happened. And that’s why our model is saying ignore real yields for now. That’s not what’s driving the Nasdaq. It’s the real economy,” Roberts said. “If that’s the case, then this should be some push for growth stocks over value stocks,” Bharath told MarketWatch via phone. “I think the equity market is looking ahead and thinking growth is going to be slow and therefore growth stocks will come back especially when interest rates start going up and maybe come down in 2024.”
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