After dropping more than 33% last year amid aggressive interest rate hikes and stubborn inflation, the tech-heavy Nasdaq composite has recovered roughly 12% in 2023. Better than expected labor market data, the rise of Artificial Intelligence (AI), and optimism about a potentially dovish Federal Reserve have helped boost the beaten down sector. But Gene Munster, a veteran tech analyst and managing partner at Deepwater Asset Management, warned Monday that Fed Chairman Jerome Powell could pop tech investors’ bubble this week.
Fed Chair Powell will appear before the Senate Banking Committee on Tuesday and Wednesday in his first public outing since a Feb. 7 interview with the private equity billionaire David Rubenstein that was largely interpreted as dovish by markets. He’s expected to discuss February’s Federal Open Market Committee meeting minutes, where most Fed officials said they anticipated “ongoing” rate hikes and some even argued that recent labor market strength warrants a “tighter stance of monetary policy.”
Munster argued that Powell realized after his comments last month that if he is not “overly hawkish”—repeatedly doubling down on his inflation-fighting stance—every time he speaks, then markets interpret it as a sign that he will pause interest rate hikes or even pivot to cuts.
As a result, the tech analyst said that he expects to see Powell “retreat to his fallback position of a more hawkish tone” during the hearing. And a hawkish Fed is never good for tech stocks, which rely on low rates to invest in their growth and are often valued using the Fed’s benchmark interest rate.
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