The majority of US advisors say tech stocks will outperform in 2021 and just one-third think the sector is in bubble territory, recent research shows.
- 53% of advisors think tech stocks will outperform in 2021
- 94% say their clients have exposure to US tech shares
- 34% think there is a tech stock bubble
- 18% say tech shares will follow the same trajectory as the dot-com bubble
- 26% have recommended clients sell tech stocks
A CoreData Research study of 400 US financial advisors conducted in December found more than half (53%) think US tech stocks will outperform over the next 12 months. About a quarter (28%) think tech shares will perform in line with the broader market, while just 16% think they will underperform.
This bullish view has led advisors to downplay the existence of a bubble. Only one-third (34%) think there is a US tech stock bubble brewing. And an even smaller proportion (18%) say the growth in technology shares will follow the same trajectory as the dot-com bubble.
Meanwhile, almost all advisors (94%) say their clients have exposure to large cap US tech stocks. While 60% of advisor clients gain exposure through individual tech shares themselves, the most popular investment vehicles used to access the sector are actively managed US large cap/growth funds (68%) and thematic/sector ETFs (63%). More than half (52%) also invest via index funds tracking the broader US stock market such as the S&P 500.
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Andrew Inwood, founder and principal of CoreData
Portfolios Exposed To Major Correction
“These findings show that a large number of investors have indirect exposure to tech stocks – leaving portfolios exposed to any major correction in the sector,” said Andrew Inwood, founder and principal of CoreData.
“The recent retreat in tech suggests investors may be in for a bumpy ride in the months ahead. As always, having a diversified portfolio is key.”
Despite their optimistic outlook, almost half of advisors say stretched valuations (46%) and regulations impacting the tech sector (46%) could cause a potential crash in US tech stocks. Such concerns are translating into action for some — a quarter (26%) of advisors have recommended clients sell tech stocks to protect them from market falls.
In addition, more than half (52%) of advisors agree the pandemic has helped push FAANG stocks to valuations disconnected from their fundamentals. But at the same time, advisors do not think tech stocks will fall back down to earth upon removal of the Covid boost. Less than one in five (17%) say an end to the pandemic will cause a crash in tech stocks. And just 6% think an economic recovery will cause a crash in tech.
“This suggests that rather than seeing tech stocks as a pure Covid play, advisors think they will continue to benefit from long-term secular growth trends and shifts in consumer behavior,” added Inwood.
Key Findings
How do you think US tech stocks will perform compared to the broader market over the next 12 months?
How do you think US tech stocks will perform compared to the broader market over the next 12 months?
This article was originally posted in Investing.com
