The tech giants have recovered sharply in the stock market since their respective lows last year due to the COVID-19 crisis. With the pandemic related restrictions continuing to ease on the back of vaccine rollouts, investors are hungry for even broader profits in the upcoming months. Wells Fargo Securities’ Christopher Harvey, however, warns now is the time to take your money off the table.
Christopher Harvey’s comments on CNBC’s “Trading Nation”
Harvey says the rising rates are setting big techs for a major correction in the near future. On CNBC’s “Trading Nation”, he said:
“There is a multitude of reasons. One, the premium you are paying is still exceptionally high. Two, the next 25 basis point move in a ten-year yield is up, not down. These stocks are very rate-sensitive. As rates go higher, we expect them to underperform. And lastly, many of the cyclical companies have managed their earnings expectations quite well. They’ve been more conservative. So, we believe this cycle will last longer than many people thought it would.”
Tech giants selling at a very high multiple is a warning sign
According to the Head of Equity Strategy, tech giants are likely to see a double-digit sell-off in the next three to twelve months. He acknowledged that these companies have high growth rates but highlighted them selling at a very high multiple as a warning sign. Some of these stocks have already started to decline, and the downside is likely to accelerate in the future, Harvey commented.
“The broader market will move sideways or go down in the future because tech stocks are a major constituent of it. Many of the cyclical companies, on the other hand, have mid-single-digit to double-digit upside from here
