Recently, the dominant position of technology stocks in the US stock market has further strengthened. "At present, the market's optimism for technology stocks is like the Internet foam in 1999" - this is the latest view given by Bank of America strategists.
In the fourth quarter of last year, the decline in US Treasury yields pushed up the NASDAQ index, but in the past four weeks, the situation has changed, with both US Treasury yields and the Nasdaq index rising. Michael Hartnet, a strategist of Bank of America, and his team wrote in a report that such fluctuations usually only occur after the economic recession, such as the Internet foam in 2009 or 1999.
The strategist team pointed out that the general mentality is that although monetary policy is tightening, the economy is expected to continue to perform strongly.
Hartnett pointed out that in fact, investors are not too concerned about whether the Federal Reserve will cut interest rates in March or May, but rather about the trend of some key indicators. For example, before the inflation rate rebounds again, the market will assume that the Federal Reserve's decision is favorable for asset prices; Furthermore, if the unemployment rate rises, it may significantly alter the macro market environment.
Technology stocks lead the upward trend
Amidst multiple positive factors such as interest rate cuts, economic stability, and optimism towards artificial intelligence, the tech giants led the Nasdaq 100 index to a 54% surge last year.
Now, as investors continue to bet on large technology stocks, this upward trend will continue throughout 2024. In the latest financial reporting season, stronger than expected performance from Meta and Amazon may provide more momentum. On Friday US stock time, Meta's stock price surged by 20%, and Amazon's stock price also rose by nearly 8%.
In addition, nearly half of the increase in the S&P 500 index in January this year came from the contributions of the "Big Seven".
In line with Hartnett's view of the increasing dominance of technology stocks, earlier this week JPMorgan Chase's strategist Khuram Chaudhry issued a similar warning. Chaudhry believes that the US stock market is more and more similar to the Internet foam period.
Due to concerns that inflation will continue to exceed the Federal Reserve's target of 2%, Federal Reserve Chairman Powell dispelled market bets on a rate cut in March this week.
Hartnett also pointed out in the report that currently 75% of investors expect a soft landing for the US economy, while 20% of investors expect the economy not to land.
The scenario of "no landing" refers to the situation where despite a significant interest rate hike by the Federal Reserve, the economy maintains growth, the labor market is strong, and inflation is difficult to dissipate.