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The great rotation out of tech stocks

The U.S. stock market is having a very rough October, with declines powered by worries about Federal Reserve monetary policy, rising bond yields, trade friction and the outlook for the tech sector.

The Dow Jones Industrials Average did a faceplant on October 10, posting an 832-point decline.

More broadly, the U.S stock market is having its worst third-quarter start since the global financial crisis 10 years ago, according to the Wall Street Journal.

Defensive Strategies

Investors have been pulling out of tech and other growth stocks in recent weeks, likely thanks in part to the recent hike in government bond yields and the Federal Reserve’s interest rate increases.

In my opinion another factor is the US-Chinese trade war. The Trump administration has slapped more than $200 billion of tariffs on Chinese goods.

Silicon Valley firms like Microsoft, Apple and Intel have big operations in China and the country is a big market as well.

In my view, the stock market may turn more volatile in the next few months. With inflationary fears rising, a strong economy but a tight labor market, the Fed isn’t likely to let up on its tighter monetary policy. The American central bank is expected to raise interest rates another quarter of a point in December. The Fed’s more-restrictive stance may make for some unsettling times the rest of 2018.

This material is from Interactive Advisors Asset Management and is being posted with Interactive Advisor Asset Management’s permission. The views expressed in this material are solely those of the author and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Xavier Brenner has covered global market, business and economic trends since 2013 for Interactive Advisors, a robo-advisor offering actively and passively managed portfolios and a division of the Interactive Brokers Group.

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