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.
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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