Don't buy, rent the pivot with tech still in for stormy seas, BofA says
Douglas Rissing

Tech and megacap stocks are only in the beginning of a de-rating period, even if this is the beginning of a Fed pivot, BofA Securities says.
Thursday's stock surge was fueled by a combination of political gridlock, a crypto credit event, a pivot-friendly CPI and "bears galore," BofA strategist Michael Hartnett said. "What's not to love?"
Traders dove into the "pivot portfolio" of dumping the U.S. dollar (DXY) (USDOLLAR) (UUP) and buying the 30-year Treasury (US30Y), Japanese yen (FXY), homebuilders (XHB) and chips (SOXX) (SMH).
Hartnett says "rent the pivot" because no recession means no rate cuts next year, adding that they own the 30-year Treasury and yield curve steepeners going into 2023 and are "happy nibblers" of the new leadership of small-caps (NYSEARCA:IWM), Industrials (NYSEARCA:XLI) and resources (NYSEARCA:XLB).
But the "multi-year derating" of tech (XLK) (XLC) and FAANG - Meta (META), Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOG) (GOOGL) - is just beginning, he added.
Tech and FAANG will "underperform in the coming years," Hartnett said.
UBS is looking for a 16% drop in stocks going into mid-2023.