• The strong returns in IT are underpinned by solid fundamentals, but the trade has become crowded to a point where stocks are being priced for earnings perfections.  This is reflected in valuations, which look stretched.
  • By comparison, cyclical stocks have begun to rally on the improving US economic outlook.  Earnings expectations don’t look overly optimistic and valuations are generally not overly stretched.
  • Investors wanting to lock in profits or invest new money into equities should now look beyond the crowded trade in tech stocks. US-led cyclical growth, will likely have the tailwind of lower rates later in the year.
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