- Tech stocks’ start-of-year rally is likely to fade soon, according to Sand Hill’s Brenda Vingiello.
- The Nasdaq Composite is up 12% in 2023 thanks to investors’ expectation of interest-rate cuts.
- But “it’s just really hard to make a case for ongoing improvement from here,” Vingiello said Friday.
Tech stocks’ start-of-year rally will fade soon with rising interest rates likely leading to investors shying away from the market, according to Sand Hill Global Advisors’ chief investment officer.
“It’s just really hard to make a case for ongoing improvement from here in terms of stock prices,” Brenda Vingiello told CNBC’s “Halftime Report” Friday in a discussion about whether tech shares can hang onto their recent gains.
The Nasdaq Composite has jumped 12% over the past six weeks, rebounding after sliding just under 33% last year.
That’s because some investors are hopeful that the Federal Reserve will cut interest rates to support the economy later this year. Growth and tech stocks tend to rally on the prospect of lower borrowing costs, which boost the future cash flows that make up a key part of their valuations.
But majority of money-market traders only expect one rate cut in December, according to CME Group’s Fedwatch tool – and stocks’ rally can’t be expected to sustain if monetary policy stays tight until then, according to Vingiello.
“I do think, when we think about can this trade continue, we have to look at what’s really happening right now with multiples,” she said. “We’ve had a really nice move in the market so far this year – it feels really nice after last year – but I think we’re going to be limited in terms of the multiple that people are willing to pay in this environment where interest rates are still rising.”
Recent strong jobs numbers could also help to drag tech stocks back down, the Sand Hill investing chief added.
The US economy added a better-than-expected 517,000 payrolls last month – which could give the Fed more scope to extend its monetary-tightening campaign, because it knows it can bring inflation down towards its 2% target without crushing the labor market.
“We’ve had such a strong jobs number recently that I think the Fed is going to continue raising rates and so I think that’s going to continue to put a lid on valuation multiples,” Vingiello told CNBC. “It’s just hard to argue for a lot more expansion from here.”
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