Tech stocks could still decline further as the economy recovers from the coronavirus disease 2019 pandemic, Markets Insider reported.
- According to Deutsche Bank, the sell-off in tech stocks is more driven by relative earnings growth and extended valuations rather than interest rates.
- The bank said that equity valuations “depend critically” on long-run earnings growth expectations, which would lead to strong trends for companies with physical activities.
- With such trends expected to be seen in firms with restaurants and casinos, this could indicate that the tech sell-off could run further.
- Deutsche Bank believes that while the correction continues, tech stocks could instead consolidate sideways until relative earnings are in their favor.
- The bank said that the upward movement in growth stocks indicates that relative performance could re-align with relative earnings.
- The realignment does not necessarily demand a correction, and instead could come in a sideways or slightly down relative price movement.