Barclays: Risks for Tech correction are mounting despite strong fundamentals
Risks for a correction in technology equities are increasing despite the sector’s robust fundamentals, Barclays strategists warned on Tuesday.
Specifically, the bank highlighted that the Leadership Gap measure between the top six stocks and the rest of the S&P 500 had reached the 94th percentile by the end of May, up from the 70th percentile in January. Furthermore, mutual funds started the year with heavy consensus overweight allocations to Tech and Big Tech, and have increased those weightings even further through the first and second quarters of 2024. As a result, the active weight on Big Tech among equity mutual funds is now more concentrated than ever.
Lastly, the bank’s strategists said there is also a risk of spill-over from Europe. Recent political developments in Europe, particularly the call for snap parliamentary elections in France, have been poorly received by markets there but have not yet significantly impacted US equities.
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