February 2, 2023

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The harsh reality for investors eyeing technology stocks in 2023

This article first appeared in The Morning Brief. Get the Morning Briefing sent straight to your inbox every Monday through Friday by 6:30 AM ET. Subscription

Monday, January 2, 2023

Today’s newsletter by Brian Suzyeditor-at-large, and Anchor at Yahoo Finance. Follow Suzy on Twitter @employee and on linkedin. Read this and more market news on the go Yahoo finance app.

yes, Markets are closed today.

So you may be wondering why you are applying for Morning Brief Newsletter straight to your inbox.

The answer to this question is simple: If you don’t strive to improve as an investor every day – even on market closing days – you are likely to lose in the long run.

And you best believe that other people around the world are trying to get better around the clock. Eat or be eaten in the global markets.

To that end, I offer a quick investment lesson for those who might be preparing to buy the whole hog Collapsing technology stocks Right out of the gate in the year 2023.

We all know the technology background entering the new year.

chew This exchange Me and my colleague Brad Smith With an experienced technical analyst Mark Mahaney In Evercore ISI on Yahoo Finance Live last week:

Yahoo Funding: Can technology rebound without the Fed’s pivot or at least a pause?

Mahaney: I pause at your pause question. So I guess the answer is, no, you can’t. But the magnitude of this movement. And so, going from zero to an expectation of a 4% surplus, and from 4% to 5%, that’s a massive step. And going forward, I don’t think the interest rate shock is going to be as big as we’ve seen this past year. This is kind of the answer to your question. I think if rates continue to rise and the Fed stays hawkish, it will be very difficult for developing technology stocks to materially outperform. I don’t think they will perform as poorly as they did this year.

We were blown away by presenter friend Mark, who underlined how difficult it is to pick tech stocks right now.

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Investor sentiment is low on what tech companies can produce in terms of the highest and final results this year, as most economists and investors prepare for. Slowing economic growth.

The easiest way to see this concern is through the prism of the markets: The Nasdaq Composite Index is down 33% in 2022.

Former tech stocks like Snap (pop) and Tesla (TSLA) Finished the year with 80% and 65%, respectively. The cash cow, the safe haven stock that is Apple (AAPL) It lost 27% last year.

Apple CEO Tim Cook presents the new iPhone 14 at an Apple event at its headquarters in Cupertino, California, US, September 7, 2022. REUTERS/Carlos Barria

Again, the feelings are horrible right now.

And that should continue until tech companies prove they can re-accelerate growth and convert more top-line revenue into net profits for investors.

But here’s the catch – technology stocks will continue to catch wind until the Fed signals a pivot in interest rate policy. And everyone knows that.

So the first part of your lesson is to proceed with caution on technology stocks that look “cheap” until we get a more dovish Fed.

The second part is that you need to be ready to act before the Fed clears everything up.

And if you think you’ve found a great thesis paired with a sharply reduced grade, it might be worth a bite.

One of these names could be Meta Platforms (meta), as Mahaney suggests.

“I think you’re going to have a big reissue in Meta stock,” Mahaney says.

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The beleaguered social media company formerly known as Facebook is entering 2023 with a near-rock bottom valuation and the imminent benefit of billions of dollars in cost cuts.

These are cost-cutting tech competitors like Amazon (AMZN) and Google (The Google) has yet to be taken — which makes the Meta stock “relatively” more attractive.

And if cost cuts aren’t a thesis to get you excited about tech stocks, you can thank Jay Powell for that. The ball is in his court.

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