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        Q4 Earnings Review: Disappointed earnings but satisfied results?
        Views 1.7M Contents 123

        Big tech stocks are the big winners in the first quarter of the U.S. stock market

        If there is one phrase to sum up the U.S. stock market in March and the first quarter, it is "banks on fire, technology gaining". The cooling of inflation and the turmoil in the banking system has investors betting that interest rate hikes have peaked and the Fed is about to turn, rushing into technology stocks that have plunged over the last year.
        $Nasdaq Composite Index(.IXIC.US)$ recorded its best quarterly performance since 2020, and $Invesco QQQ Trust(QQQ.US)$ , which excludes financial stocks and is dominated by large technology companies, rebounded more than 20% from last year's lows to enter a technical bull market.
        Meanwhile, the $S&P 500 Index(.SPX.US)$ rose just 7%, while the $Russel 2000 ETF(BK2714.US)$ , which is dominated by smaller companies, gained less than 3%.
        Big tech stocks are the big winners in the first quarter of the U.S. stock market
        In February, U.S. stocks were far from the cheerful look of today: the market rally in January after a sustained downturn, well-known analysts and market participants have warned investors that U.S. stocks are in a " death area ", or " do not buy the dip ". Until early March, strong
        Strong U.S. economic data also let the market believe that the Federal Reserve will be in the March meeting - a sharp 50 basis point increase in interest rates.
        As a result, on March 8, the market narrative was turned upside down: the collapse of $SVB Financial(SIVBQ.US)$ triggered turmoil in the financial system, leading to concerns about the health of the banking sector. And the merger of $UBS Group(UBS.US)$ and $瑞士信贷(CS.US)$ convinced investors that the Fed would not continue to fight inflation by raising interest rates.
        The credit crunch caused by the banking crisis has also been good for large technology companies. If borrowing becomes more difficult, it is clear that the most resilient performance is those large companies with the most cash flow and not dependent on borrowing, such as $Apple(AAPL.US)$ , $Microsoft(MSFT.US)$ and $Alphabet-A(GOOGL.US)$ . At the same time, the banking crisis triggered by the bond market volatility, but also bond investors have to buy stocks of large technology companies to "hedge".
        As shown in the chart below, the most heavily weighted large technology stocks in the broad market index rose sharply, driving the entire U.S. stock market to survive the March calamity.
        Big tech stocks are the big winners in the first quarter of the U.S. stock market
        Big tech stocks are the big winners in the first quarter of the U.S. stock market
        In addition, the core PEC, the Fed's most watched inflation indicator, softened in February, rising 4.6% year-over-year, which was lower than expected, further convincing investors that the Fed is about to stop raising interest rates.
        Myles Bradshaw, head of asset division strategy at JPMorgan Chase, noted that the market generally believes that interest rates are now considered to have peaked and expects a rate cut by the end of the year. However, JPMorgan still predicts that the Fed will raise rates at least once more, and will not cut rates until 2024.
        There are also views that the collective rise in technology stocks in the first quarter was actually largely due to overselling last year.
        In 2022, the Fed's aggressive rate hike greatly hurt tech stocks. From a macro perspective, soaring inflation and rising interest rates drove investors away from growth companies and into companies with high margins, stable cash flows and high dividend yields. The market overreacted to the consequences of the rate hike, and as a result, tech stocks fell too much, so in this year, the rally was also the biggest.
        Looking ahead to the market, how long can the rally in tech stocks last? The market does not yet have a consensus on this question.
        Martin Tilier, a columnist on NASDAQ's official website, pointed out that the next, the performance of technology stocks largely depends on the second quarter of the Fed's policy. But he believes that in the long run, the rally will continue, now is still a good time to buy technology stocks.
        And Michael Landsbera, chief investment officer at lands Bera Bennett, believes that in the current macroeconomic environment, people should not use technology stocks as a safe haven. He pointed out that as the U.S. economy falls into recession, demand will begin to soften and the fundamentals of technology companies are continuing to deteriorate
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