Goodbye tech stocks? Analysts say the ‘old economy is back

Russian economy according to Wall Street
  • Wall Street experts believe that because of the rate hike, investors should abandon big tech companies.
  • In turn, analysts expect traders to return to betting on the energy, housing and metals sectors.
  • Furthermore, they claim that the stock market has not reversed its trend but is experiencing a rebound.

In the fashion industry, what was once a trend in the past usually comes back to the forefront many years later. And, apparently, the same thing can happen on Wall Street.

It is that the probable end of the zero interest rate policies (ZIRP, for its acronym in English) changes the investment model in the short term and bets again on the “old economy”, that is, the energy sector, houses and metals.

What about big tech stocks? Bank of America believes it is time to rotate portfolios as it believes a rally is in the offing of a bear market.

“Historically, bear markets have resulted in a leadership turnaround, suggesting that the old economy sectors are likely the winners of this cycle while Big Tech has been driven by free money”

Savita Subramanian, BofA’s head of US equity and quant strategy.

DoubleLine Capital founder and CEO Jeffrey Gundlach agrees with his colleague, saying he believes Wall Street is in a “prolonged bear market.

Another expert suggesting as much is Morgan Stanley’s Mike Wilson, who told clients that the recent rally was “a speculative frenzy” based on false hopes of a turnaround from the Federal Reserve.

Several analysts indicated that investors decided to buy en masse based solely on inflation data without taking into account the risks of a recession. However, other professionals believe that the United States can still achieve a “soft landing” thanks to the strength of the current labor market.

“With the end of ZIRP, we see the pendulum swing back to the old economy, as prolonged underinvestment has led to supply problems in the old economy,” Subramanian concluded.

In that sense, Bank of America raised its rating to buy metals as well as in the energy sector.