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- The stock market rally will continue as tech stocks have made a strong comeback, according to Fundstrat’s Mark Newton.
- “We do see signs of technology coming back with a vengeance in the last couple of weeks,” he said.
- So far in 2023, the tech-heavy Nasdaq and S&P 500 have rallied 15% and 7%, respectively.
The stock rally in place since the start of the year is poised to prevail as tech shares – which took a drubbing in 2022 – come back with a “vengeance,” according to Fundstrat’s head of technical strategy.
In a CNBC interview on Monday, Mark Newton said he remains 100% bullish on equities. “Momentum and breadth have improved substantially over the last couple of months. We are in a seasonally very bullish period,” he said.
“We’re seeing very high levels of investor cash. That makes me think that we are in very much a bull market that can continue,” Newton said, adding that the market likely hit its lowest point last October.
“We do see signs of technology coming back with a vengeance in the last couple of weeks. Tech is now the third best-performing sector in the year and that’s obviously quite important,” he added.
The tech-heavy Nasdaq Composite and the S&P 500 are up about 15% and 7% so far in 2023, respectively. This follows a year where the two benchmark indices ended with losses of 33% and 19%. Powering the rally in tech stocks is Meta, which has surged about 25% in 2023 after it posted fourth quarter results that beat revenue expectations.
The optimism in stocks also comes as inflation cools, sparking optimism the US central bank could ease up on its aggressive campaign of interest-rate increases. Even Federal Reserve Chairman Jerome Powell acknowledged progress on stamping out consumer price pressures, mentioning the word “disinflation” 15 times in his FOMC press conference last week.
“The market is respecting inflation selling off sharply as well as a pivot potentially with the Fed, at least in the US,” Newton said. While the US central bank raised interest rates by 25 basis points last week, but it was the smallest increase since last March.
“As interest rates continue to come down over the course of the year, I think growth comes back and tech outperforms,” Newton added. Lower rates mean lower borrowing costs for investors, increasing their appetite for growth stocks.