Broker Check

Why Are Rising Yields Hurting Tech?

On March 4, 2021

I wanted to share my thoughts on why rising yields are hitting tech so hard. 

The core issue here is economic growth. Due to economic re-openings, stimulus, and vaccine optimism, global investors are pricing in a huge jump in economic growth. That is why yields are rising.

And, that expectation of better growth is causing the unwind of last year’s flood into tech shares. During the pandemic, investors poured into tech. They did that for two reasons. First, the pandemic benefitted most tech companies. Second, tech earnings growth is much less sensitive to broad economic growth than other market sectors. So, in 2020, investors who wanted earnings growth had no-where to go but tech, courtesy of the pandemic. That, in turn, sent tech shares screaming higher to historically high valuations.



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