Yahoo Finance Tech stocks back as a safe-haven trade as banking crisis unfolds: Analyst
One chart shows the divergence between bank and tech company stocks.
Tech stocks are back en vogue as a safe-haven trade amid a rolling global bank crisis that has culminated (so far) with UBS buying ailing Swiss rival Credit Suisse.
The tech-heavy Nasdaq Composite (^IXIC) is down less than 1% over the last month, outperforming the S&P 500's decline of 3.7%, according to Yahoo Finance data (see chart below). Meanwhile, the KBW Bank ETF (KBWB) — which has been in focus amid the meltdowns of Silicon Valley Bank (SIVB), Signature Bank (SBNY), and First Republic (FRC) playing out — has tanked more than 27%.
Tech experts point to a few reasons behind money flowing back into big-cap tech names.
The sector's executives have "cleared the deck" in terms of earnings guidance, Wedbush analyst Dan Ives told Yahoo Finance. Cost-cutting from the likes of Meta (META), Salesforce (CRM), Microsoft (MSFT), and others has set the tech space up to show improved profits later this year.
"There are no Sunday night jitters with tech," Ives added, pointing to Sunday's chaotic news flow around the end game for struggling Credit Suisse.
The bid under tech stocks runs counter to the narrative over the past year prior to March's banking collapse.
From January 1, 2022, to February 28, 2023, the Nasdaq Composite had dropped about 25% — under-performing the S&P 500's 19% decline. The tech sector was weighed down by three factors: 1) Slowing sales and profits; 2) rising interest rates, which tech stock investors don't like; and 3) weakening financial outlooks.
With some of those factors reversing, Ives says the sector is becoming a favorite again. The banking crisis leading the Federal Reserve to pause interest rate hikes would be a large tailwind, too, he said.
"The Fed is in handcuffs," Ives added.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com
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