Positioning among equity investors in tech stocks is consistent with much slower earnings growth than the sector is achieving. Deutsche Bank thinks it’s time to go overweight once again as the risk-reward profile favors a sector that is suddenly out of fashion.
Tech stocks have made big V-shaped rebounds five times in 30 months — and now Deutsche Bank forecasts another bounce
In short
Deutsche Bank is calling for another rebound in technology equities following five major V-shaped recoveries observed over the last 30 months. The bank recommends an overweight allocation because current market positioning incorrectly assumes a sharp deceleration in sector earnings growth. Although tech shares have suddenly fallen out of favor, the firm believes their actual financial delivery remains robust. Consequently, analysts view the current risk-reward profile as highly favorable for entering the sector ahead of a projected bounce.
Key points
- Disconnects between pessimistic market sentiment and actual corporate performance offer a…: Disconnects between pessimistic market sentiment and actual corporate performance offer a favorable risk-reward balance for tech investors.
- Historical trading patterns indicate tech shares have repeatedly demonstrated rapid recov…: Historical trading patterns indicate tech shares have repeatedly demonstrated rapid recoveries following recent downward trends.
- Portfolio managers should consider increasing their exposure as the sector prepares for a…: Portfolio managers should consider increasing their exposure as the sector prepares for another potential bounce.