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The ongoing rout in tech stocks — a no-brainer pick for more than a decade — looks to be more than a short-term pullback: Bank of America Corp (NYSE:BAC).’s January global fund manager survey showed that net allocation to the sector fell 20% month-over-month to 1%, the lowest since 2008. At the same time, overweight positions on bank stocks rose to 41% among BofA’s clients, closing in on a record set in October 2017.
“Central bank tightening remains the #1 risk to markets in 2022,” strategists led by Michael Hartnett wrote in the survey. That’s bad news for expensive technology stocks that are valued on future growth expectations and good news for bank stocks, which have suffered for most of the past decade amid ultra-low or negative yields.
The stampede out of tech continued on Tuesday, with futures contracts on the Nasdaq 100 falling as much as 2.1% while yields on U.S. 10-year Treasury notes hit a two-year high of 1.85%. The tech-heavy Nasdaq is now down 4.3% this year, while the KBW Bank Index of U.S. lenders has jumped 11%.
BofA’s survey, showing the newfound popularity of banks, was conducted between January 7 and 13 and comprised responses from 329 fund managers with $1.1 trillion in assets under management.
A separate Deutsche Bank AG (NYSE:DB) survey published today showed that a majority of more than 500 respondents think U.S. tech shares are in a bubble. In the survey of market watchers conducted last week, 49% agreed the sector is in bubble territory, while 39% disagreed and the other 12% said they didn’t know.
The direction of travel in markets may now be dependent on the earnings season that kicked off last week. U.S. reports, which include Netflix Inc (NASDAQ:NFLX), Bank of America and Goldman Sachs Group Inc (NYSE:GS). this week, “could help tip the scales in either a positive or negative direction,” according to AJ Bell investment director Russ Mould.
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