Can it thrive in a tightening environment
It goes without saying that US tech stocks have gone from strength to strength the last two years and while there have been small setbacks along the way, the trend remains very strong.
While they suffered along with the rest early in the pandemic, it soon became clear that those companies that were most future-proof and better placed to thrive in an environment that massively accelerated pre-pandemic trends were going to do well. Whether that be online shopping, working from home, gaming, etc, these companies were ahead of the pack and are reaping the rewards.
And while there have been wobbles along the way and a lot of concern about how many of these firms will adjust to a monetary tightening environment, it’s clear investors are in no rush to abandon ship. As we saw after the Fed on Wednesday, investors (tech included) fear inflation far more than modestly higher rates.
The recent pullback saw the index find support once again around the 55/89-day SMA band before getting a post-Fed lift. While a break below here would have been a setback, as long as the channel holds, the trend continues to look healthy.
The next test to the upside is 16,500 where the index has repeatedly run into resistance followed by the all-time high around 16,771.
We may not see price soar from here given the uncertain interest rate environment which has hindered tech firms more than others. That said, they have performed best in restriction/lockdown environments and that appears to be where we’re heading once again. That may be supportive depending on how severe restrictions become and how long they last.
