The Best Nasdaq Run Since 2009 Is Coming to an EndBy
UBS says ‘the difference now is central banks’ turning hawkish
Leuthold sees market breadth boding well for second half
All good things must come to an end. Or is it a pause?
Either way, recent convulsions in tech shares are virtually certain to saddle the Nasdaq 100 Stock Index with a loss in June, snapping the longest streak of monthly gains since 2009. The gauge is down 2.2 percent since May 31, poised for the biggest retreat in a year.
Now the question to investors is whether the weakness is a natural reversion from higher prices or a sign of broader drawdowns to come. Here are a few things strategists and traders will be following, with charts:
- Julian Emanuel, executive director of equity and derivatives strategy at UBS: “The difference now is central banks have become far more aggressive in their hawkishness. Tech can’t rebound at this moment if yields are going higher in the near-term. You have an informational vacuum the next few weeks and there is still a residual tendency by our clients to be defensive about tech. We think the group will stay under pressure until yields go back up.”
- Kevin Kelly, chief investment officer at Recon Capital Partners LLC: “Tech volatility went below that of the S&P 500. VXN went below VIX. Tech started rolling over because it ran so far so fast and economic data hasn’t adjusted to share-price gains. We’re also getting to a point where the biggest buyers of tech shares are the companies themselves but we’re about to go into a black-out period for that.”
- Doug Ramsey, chief investment officer at Leuthold Weeden Group, says odds of more gains in the second half of the year look “reasonable” due to strong market breadth on the S&P 500 Index and NYSE that made all-time highs on June 19 and 28th, respectively.