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“ ‘History is littered with examples of changes in the regime, be it political changes and the sociopolitical backdrop, macroeconomics or indeed regulatory, and so the message to investors really is to make sure that you don’t let your portfolio, or your batch of investments, get sucked into that ever smaller, more concentrated batch of recent winners.’ ”
That’s Barclays Wealth Chief Investment Officer, Will Hobbs, warning in an interview on CNBC of a potential sell-off in big technology company stocks such as Amazon AMZN, +2.78%, Apple AAPL, +1.88%, Alphabet GOOG, +0.64%, Netflix NFLX, +5.63%, Tesla TSLA, +3.16%, etc., in the face of rising interest rates.
“One of the theories around the current context for markets is that a lot of it is quite dependent on ever-lower real interest rates, because if you think about the valuation of some of these tech titans, think about the shape of their cash flows, they’re sort of like long-duration bonds,” Hobbs said.
He explained that these big tech winners have been the beneficiary of falling interest rates for years, but he warned it won’t last forever, particularly in light of the world’s unprecedented policy environment.
“The industry has long been obsessed, and investors are understandably obsessed with the idea that you can protect downside and capture equity upside,” Hobbs said. “That is like the Holy Grail of investing.”
He added that a shake-up is in order for investors leaning too heavily on the tech companies driving the bull market. “You have to own some losers as well, because you have to plan for a future that isn’t just a continuation of the recent past, as so often isn’t the case,” Hobbs said.
His comments were published in the wake of a U.S. House subcommittee report, which concluded that Big Tech poses a grave threat to markets that might require breaking up the most prominent U.S. companies.
As for Wednesday’s bounceback trading session, no signs of a selloff just yet, with the Dow Jones Industrial Average DJIA, +2.04%, tech-heavy Nasdaq Composite COMP, +1.92% and S&P 500 SPX, +1.85% all logging strong gains.
