Therese Poletti’s Tech Tales: One question looms about where tech stocks go now, after one of their worst years on record

by | Dec 29, 2022 | Stock Market

Investors face a single question after one of the worst years on record for tech stocks: Is the party over, or just on hold for a while? The late Queen Elizabeth’s declaration of an “annus horribilis” would not be enough of a description for tech stocks’ journey in 2022. The S&P 500 index’s
SPX,
+1.75%
information-technology sector is down more than 28.8% so far this year, on track for its worst year since 2008, while the communications-services sector — home to some of the internet’s biggest names, including Alphabet Inc.
GOOGL,
+2.82%
GOOG,
+2.88%,
Meta Platforms Inc.
META,
+4.01%
and Netflix Inc.
NFLX,
+5.14%
— has declined 40.4%, the worst year on record based on data that goes back to 1989, according to Dow Jones Market Data. The consumer-discretionary sector, which includes Amazon.com Inc.
AMZN,
+2.88%,
is also having its worst year on record with a 37.4% decline; together they are the only S&P 500 sectors to suffer that fate in 2022.

“This past year has been a nightmare,” summed up Dan Ives, a Wedbush Securities analyst. The trajectory is unlikely to turn around completely in 2023 for the tech sector writ large, especially in the first half of the year. But the real question is if the phenomenal growth of tech companies and their shares since the end of the Great Recession has ended for good, or if the excessive growth of the first two years of the COVID-19 pandemic has produced a couple of years of stagnation before the hockey stick returns sometime in the near future. There may not be an answer to that question in 2023, but the performance of tech stocks and the profit and revenue that large tech companies report in the coming year can give us plenty of tea leaves to read for a prediction. For instance, growing optimism about a rebound for the semiconductor sector in 2023 could presage a wider tech bounceback down the road. What to expect from tech stocks in 2023 A look at Wall Street’s forecasts can provide some sense of which companies are still ready to grow in the current economic downturn, and what sectors may be poised for the biggest recovery. For now, it looks as if 2023 could be a bottom for tech, but this is where investors have to decide to trust Wall Street analysts and their calls, or go on their own. But in the current environment, a broader index-based approach may not make the most sense. “All tech is not going to be the same in 2023,” said Brendan Connaughton, founder and managing partner of Catalyst Private Wealth in San Francisco. “I think it’s going to be much more of a stock picker’s market.” Ives believes there will be neither a “brutal tech tape” again nor a major bounce-back. “We believe the answer lies between these two scenarios, as 2023 will be a ‘fork in the road’ for the tech sector, with clear winners and losers that will be defined by those vendors and management teams able to successfully navigate this Rubik’s Cube …

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