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Tech stocks should perform well as economy slows -CIO

STORY: A spate of earnings reports in coming weeks is set to test a recent bounce in technology and other megacap stocks, a category whose leadership position in U.S. markets has faltered after last year’s deep selloff.

The tech-heavy Nasdaq 100 index has gained over 3% in 2023, double the rise for the S&P 500. Shares of some megacap companies - which include those grouped outside of tech in sectors like communication services and consumer discretionary - have shot higher, with Amazon, Meta Platforms and Nvidia posting double-digit percentage increases.

Several factors are driving that outperformance, including investors piling into stocks they believe were overly punished in 2022. A moderation in bond yields, whose jump last year particularly pressured tech-stock valuations, is also likely helping the group, investors said.

Now, however, the focus is shifting to whether these companies can withstand a widely expected economic downturn while supporting valuations that some investors believe are too high.