The Federal Reserve (Fed) signaled that it would raise borrowing costs and reduce its balance sheet to fight inflation which caused technology stocks to take a plunge. This hawkish stance by the Fed has led to rising treasury yields. Currently, the 10-year yield stands at 2.78%, the highest since 2019. Welt’s Holger Zschaepitz shared his thoughts on Twitter (NYSE: TWTR), showing a clear divergence in the chart trajectory between U.S. tech stocks and bond yields that is taking place in April.
A difficult year for tech and growth stocks
Rising bond yields mean that tech and other growth stocks whose valuations are based on expected profit and cash flows far in the future will have a hard time in this environment. Higher yields on Treasuries will mean that future flows of these stocks are less valuable in the present. Michael Darda, chief economist and market strategist at MKM Partners, shared his views on the market: Ahead of bank earnings and inflation data which is due later this week, investors are left to gauge the market’s overall health by tracking the Bond yields. Founder and CEO of Endeavour Equities, Douglas Orr, opined: Tech stocks historically feel more pressure when Bond yields rise; nonetheless, it is difficult to predict how much pain tech stocks will experience in this new environment where inflation is seemingly running rampant. Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
