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The broad consensus is that inflation fears are driving investors out of tech stocks this week.
But CIO David Bahnsen says that overvalued tech stocks have flown too close to the sun.
He thinks that the sell-off is healthy, inevitable, and nowhere near over.
What began as a sell-off among tech stocks on Monday spilled over into the rest of the market on Tuesday, with the Nasdaq down 2% at the market s open and the Dow Jones Industrial Average following closely behind.
And as tech-share prices surged, more and more investors wanted in, which pushed prices up even further. As Morgan Stanley Chief US Equity Strategist Mike Wilson put it, momentum begets momentum.
As the global economy gets set to reopen, and consumers get ready to spend their savings and coming stimulus checks pushing inflation and therefore interest rates higher, which hurts growth stocks Wilson sees new momentum leaders in the making. The shift we have been highlighting in the composition of momentum is not over and the factor will continue moving toward cyclicals, lower quality, value, and small caps at the expense of the longer duration growth, Wilson wrote in a March 8 note.