By Sam Boughedda
UBS Global Wealth Management Chief Investment Officer, Mark Haefele, told clients in a note Wednesday that it's too early to call time on the tech underperformance.
Over the past two weeks, tech stocks have rebounded, but, Haefele said year-to-date, growth stocks have still "underperformed by a wide margin."
"The Nasdaq is down 22% since the start of the year, compared with a decline of around 13% for the S&P 500. Rising yields have weighed on the valuations of tech stocks, particularly those that are not yet profitable, and as a result, investors have pulled out capital," said the analyst.
"Many investors have asked us whether the sell-off in growth stocks presents an opportunity. Generally, we hold a least preferred view on growth stocks. We expect them to underperform over the remainder of 2022 and advise investors with time horizons of less than one year to reduce exposure."
Instead, UBS believes the current environment is more favorable for value investing, with value stocks outperforming in inflationary environments.
"Data since 1974 suggests that value sectors tend to outperform when inflation is over 3%, and while we see inflation falling in the coming months, it is likely to remain above this threshold for some time."