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Tech Stocks Lead the Way but for How Long?

Published 05/19/2023, 11:53 AM
Updated 05/07/2024, 03:49 AM

The market this week was dominated by a few, mostly big names in the tech sector. This is likely because of the defensive properties these stocks have in holding value during turbulent times, which means that investors are growing concerned about the wider macroeconomic outlook.

Any further rally in US tech stocks will now likely depend on the Federal Reserve’s (Fed) interest rate direction next month. The verdict on whether the Fed will pause rates as of next month is not yet clear. There has been a wide range of Fed speakers this week and while some believe it is time to pause and allow the past rate hikes to take effect, some are still undecided as to whether there is enough reason to stop the current hiking cycle given the levels of inflation and unemployment.

Looking at the market-implied rate curve, the probability of ‘no hike’ in June dropped from 92% to 65% following comments from Fed speakers, suggesting investors are increasingly unsure about a possible pause to rate hikes.

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