MORGAN STANLEY: The stock market is taking a major turn for the worse, and it's bad news for tech stocks
Business Insider
Published Jul 10, 2018 06:01AM ET
Updated Jul 10, 2018 09:40AM ET
- Since June, investors have shifted toward more-defensive sectors like utilities, earnings growth for tech companies, which will report second-quarter results shortly. Wilson, however, said there's not much room to meaningfully beat expectations.
This "remarkable" earnings forecast is already reflected in stock prices, Wilson said. Similarly, the fundamentals that would drive the earnings growth are already priced in. While not in "bubble" territory, he added, the price-to-earnings ratio for S&P 500 tech companies is over two standard deviations above the postcrisis average.
Tech companies, particularly hardware providers that source parts from all over the world, have benefitted from global trade but are in the crosshairs of a trade war. Wilson expects managements to address trade during earnings calls, which could dampen their guidance and earnings growth.
On a technical note, Wilson observed that fewer stocks were trading below their 200-day moving averages.
"Given its exceptional growth and quality characteristics, tech has been a holdout to date," Wilson said.
"However, we suspect it will not be immune from the changing attitudes toward risk assets we are seeing across markets and think the sector may have benefitted from a false sense of security the past few months."
Get The News You Want
Read market moving news with a personalized feed of stocks you care about.Get The App
Written By: Business Insider
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.