Banking 'angst' is bottoming, but the rally in tech stocks is ignoring recession risks, warns TS Lombard

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Investor appear less worried about a full-blown banking crisis, but TS Lombard strategists think the subsequent rally in technology stocks largely ignores...

The rotation into technology stocks and other pandemic winners as banking jitters rattled markets in March makes it difficult to tell if investors think the U.S. economy looks headed for a recession or not.

TS Lombard’s strategists Skylar Montgomery Koning and Andrea Cicione said the move into rate-sensitive stocks like tech and communications looks misguided, in a Wednesday client note. The financial sector of the S&P 500 index SPX was up 2.9% for the week through Wednesday afternoon, according to FactSet, even though shares of First Republic Bank FRC were 33.9% lower for the same stretch.

Meanwhile the TS team pointed to communication and technology stocks that have gained more than 5% over the same stretch, as investors consider the possibility of “deep” interest-rate cuts from the Fed in the second half of this year, but not the likely impact a recession would have on earnings and growth.

 

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So, good old TS Lombard, is peddling the new narrative that banks are fine? All I can say is: Wow! The Cognitive Dissonance is real.

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