Strategists at Citigroup said the 31% gain in tech stocks this year is in danger of disappearing as the situation suggests investors are likely to start taking profits.
Analysts led by Chris Montagu noted that long positions in NASDAQ 100 futures contracts reached a 3-year high, and profit levels increased.
It is noteworthy that long positions in futures contracts represent the purchase of financial derivatives, in which investors bet on growth in the future, and the holders of these derivatives are currently in a favorable position.
“Risks are heavily skewed towards profit taking, which could put a damper on further gains,” Montague wrote in a note published Tuesday, according to Bloomberg, which Al Arabiya has read.net.
Technology stocks are rising again in 2023 after last year’s decline, fueled by the hype around artificial intelligence and bets that the Federal Reserve is close to pausing interest rates. Concerns about banking turmoil and the effects of a possible recession have also pushed investors into the sector, as it is seen as more sheltered from economic cycle stocks.
The Nasdaq 100 jumped 8.4% this month alone, hitting its highest since May since 2005, according to data compiled by Bloomberg. While the S&P 500 rose less than 1%.
Unlike Montagu, Barclays strategist Emmanuel Cao sees more upside for tech stocks as investors succumb to the fear of missing out. He maintained the sector’s high rating, saying broader equity participation is “neutral at best, despite recent gains in tech stocks.”