A big bounce by technology and other U.S. growth stocks since late last week underlines a continued disconnect between the Federal Reserve’s message on interest rates and investor expectations, analysts said.A big bounce by technology and other U.S. growth stocks since late last week underlines a continued disconnect between the Federal Reserve’s message on interest rates and investor expectations, analysts said.
Tech is rallying because the market expects the Fed to pivot on policy much sooner than officials are saying, Essaye said. Tech has historically outperformed in a declining interest-rate environment. The Fed’s so-called dot plot forecast shows that policy makers expect the fed-funds rate, now at 4.25% to 4.5%, to peak above 5% and stay there, in contrast to fed-funds futures that has priced in the likelihood of cuts by year end.
The market action looks familiar to Gargi Chaudhuri, head of iShares investment strategy for the Americas, at BlackRock.