- Technology companies are experiencing a rally in the stock market. But investors should not relax.
- The Nasdaq has tumbled 18.4% so far this year, but in the last month it has rebounded almost 12%.
- “This is not a market bottom, things are not going to go up steadily from here as we are going to be buying fewer tech products for a while,” analysts at the bank said, referring to a recession.
- Morgan Stanley experts stressed that the profits of companies in the coming quarters will be affected.
As Wall Street analysts debate whether markets have bottomed yet, the Nasdaq has jumped almost 12% in the past month.
Tech stocks, likewise, accumulate a drop of 18.4% in 2022 due to inflation, a recession that has practically arrived and other factors such as problems in supply chains. While they have rallied, Morgan Stanley analysts warn investors not to jump ahead and buy.
“This is not a market bottom, things are not going to go up steadily from here as we are going to be buying fewer tech products for a while so everyone has fewer units to make as post-COVID demand = pre- COVID”
Morgan Stanley.
To explain the current moment, Morgan pointed out that Microsoft and Apple stopped hiring staff and that small and medium technology companies are investing less money. This, along with a recession, will affect the demand for e-commerce.
Why do stocks bounce?
The bank listed some reasons as a possible drop in inflation, which is expected to ease in July, as well as a perceived slowdown in interest rate hikes, which means less pressure on tech stocks. Also, “earnings have been lackluster, but not as bad as feared.”
“Profits are not going to go up anymore; the problem is not in the current earnings season (that’s hindsight) but we are on the wrong side of the earnings cycle and its next earnings season and the one after that where we’re going to see write-downs, top-line pressure and reversal to the average of the marginsMorgan Stanley.
