Tech stocks have made big V-shaped rebounds five times in 30 months — and now Deutsche Bank forecasts another bounce
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.
The recent rebound in tech stocks is not an isolated incident, with five V-shaped recoveries occurring over the past 30 months. This pattern suggests that the sector is prone to sharp reversals, and investors are once again being presented with a buying opportunity. According to Deutsche Bank, the current positioning among equity investors in tech stocks is at odds with the sector's actual earnings growth, which has been robust.
This divergence is significant because it indicates that investor sentiment has become overly bearish, leading to a potentially oversold condition. Historically, such setups have been followed by a bounce-back in tech stocks. Deutsche Bank's forecast to go overweight on tech stocks is based on a favorable risk-reward profile, which implies that the sector's current underperformance is unlikely to persist.
As investors consider Deutsche Bank's call, it's essential to watch the upcoming earnings reports from major tech companies to gauge the sector's health. Additionally, market participants should keep an eye on economic indicators, such as interest rates and inflation data, which can impact the tech sector's performance. If the sector's earnings growth continues to outpace investor expectations, it may be poised for another V-shaped rebound, making it an attractive opportunity for investors.
Originally reported by marketwatch.com. InvestorsWire adds analysis for finance & markets readers.