Nomura Analysts Warn of Potential Collapse in U.S. Tech Stocks and Rate Cut Expectations
In a recent note to clients, Nomura analysts discussed the looming risk of a collapse in U.S. tech stocks and the uncertainty surrounding rate cut expectations. The sharp decline in tech stocks was primarily driven by the Federal Reserve's hawkish shift during the June FOMC meeting, but this factor is no longer in play.
Looking forward, analysts believe that upcoming earnings reports from key U.S. tech companies could be pivotal in determining market sentiment. Once these earnings reports are priced in, markets may shift to a more risk-on outlook, potentially impacting rate cut expectations.
While some tech companies have reported strong earnings, they have not met market expectations, causing concerns about a possible downturn. The Fed's hawkish shift led to a rotation towards undervalued sectors, putting pressure on tech stocks that had become overvalued.
The report also touches on the Fed's potential rate cuts, with Fed Chair Jerome Powell signaling a willingness to cut rates as early as September. The OIS market has already factored in a significant probability of a 50-basis-point rate cut, but Nomura suggests that this may be more of a hedge against economic downturns rather than a solid expectation.
In conclusion, investors should closely monitor upcoming earnings reports from U.S. tech companies and the Fed's stance on rate cuts. Market sentiment could shift based on these factors, potentially impacting investment decisions and overall market outlook.