In a note to clients published Monday, Nomura analysts discussed the potential risk of a collapse in U.S. tech stocks and rate cut expectations.
“If momentum turns risk-on in response to earnings reports from key U.S. tech companies, Fed rate cut expectations could be partially reversed,” the report states. The Fed’s move to reduce its forecast for the number of rate cuts in 2024 from three to one added pressure on these stocks, leading to a rotation towards undervalued sectors.
The OIS market has already priced in a significant probability of a 50-basis-point rate cut, but Nomura points out that this may be more of a hedge against economic downturns than a firm expectation.
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