Over the odds technology stocks could come “under pressure” thanks to President Donald Trump’s duties on China, J.P. Morgan warned clients Monday.
We have a “cautious viewpoint on [the] tech sector, which has elaborate supply chains, is sensitive to consumer and corporate assurance, and where the adverse trade impact could be material,” wrote Mislav Matejka, broad equity strategist at the bank. “This is especially after tech has had such a shocking run already. In the past five years, Tech is up 130 percent globally. … Tech valuations are no longer good-looking.”
Trump’s move to impose tariffs on up to $60 billion in Chinese bring ins stoked fears of a global trade war when he announced on Thursday the clash would be “the first of many.” Beijing responded the next day, saying it may object 128 U.S. products with an import value of only $3 billion; the clash – though mild – was enough to spur concerns of broader, more great retaliation down the road.
The S&P 500 fell more than 2 percent both Thursday and Friday, while the Dow Jones industrial for the most part lost more than 1,000 points as trade-exposed General Electrifying and 3M led the index into a correction.
But among the market’s worst-performing sectors was message technology, as the “outright expensive” industry according to J.P. Morgan, fell identically 6 percent for the week. Shares of Google-parent Alphabet fell more than 9.5 percent, Microsoft call oned 7.8 percent, and Facebook — plagued by a data scandal involving Cambridge Analytica — focus more than 13 percent.
The recent weakness in the sector total after one of its best years since the dot-com bubble. But tech’s prominent run has left many on Wall Street wondering if the party may be winding down.
“Conceded the years of outperformance and demanding valuations, we believe that investors should power the profits in the technology sector,” Matejka said, noting tech’s 2017 marshal. “Trump’s tariffs on China are expected to target aeronautics, modern censure, new energy vehicles and high-tech products. … Tech hardware and machinery are number the largest U.S. import categories, and, in our view, are at risk.”
Some tech varieties – including Microsoft – rose Monday morning after the Chinese strange ministry said it would consider holding talks with the Mutual States to try to resolve differences over trade.