A blistering rally in megacap growth and technology shares has buoyed markets this year, and earnings reports in coming weeks could help investors determine if those gains are justified.
US technology stocks are currently the "most crowded" trade in the market, fund managers surveyed by BofA Global Research said, as investors pile into megacaps thinking the Federal Reserve will soon stop tightening monetary policy and that the sector will remain resilient as growth slows.
Rallies in stocks such as Apple, Microsoft and Tesla have helped sustain broader indices in the face of recession worries and last month's banking crisis sparked by the collapse of Silicon Valley Bank and Signature Bank.
Apple and Microsoft, up 27 per cent and 19 per cent this year, respectively, together accounted for nearly half of the S&P 500's total advance through March, according to S&P Dow Jones Indices. The index is up around 7.5 per cent year-to-date.
Whether that rally continues could depend on companies beating already-lowered first-quarter estimates. Technology earnings are seen falling 14.4 per cent. Communication services companies, including Meta Platforms and Alphabet, are expected to post declines of 12 per cent, according to Refinitiv data.
After steep declines in 2022, "this is a group that was an underweight for a number of people and now you're seeing some of the momentum take off," said Jason Draho, head of asset allocation Americas at UBS. Earnings will show "whether this is really a safe haven if you are worried about recession".
Alphabet and Microsoft are expected to report their results on April 25, followed by Apple on May 4. Amazon, part of the consumer discretionary sector, is expected to announce results on April 27. Tesla shares fell nearly 10 per cent after missing earnings estimates on April 19.
Companies will likely use earnings reports over the next several weeks to announce further plans for layoffs, which could bolster margins ahead of a recession and make their shares more attractive, said Robert Stimpson, co-chief investment officer and portfolio manager for Oak Associates Funds.
Alphabet in January announced 12,000 job cuts, followed by Amazon in March with 9,000 cuts, and others that bring the total to 27,000 layoffs over recent months.
"Tech corrected very hard last year and it's already discounted for some sort of recession, given that it has accepted that it has to cut headcount and retrench a little bit," said Mr Stimpson. "It's an industry that is accepting its medicine."
Mr Stimpson is cutting back on his energy exposure in anticipation of a recession.
However, signs of improving profitability could power "another leg up" in the rally, said Tom Plumb, portfolio manager of the Plumb Funds, who has large positions in Nvidia and Apple. Nvidia shares are up more than 90 per cent this year.
"We paid the penalty for holding on to a number of these stocks last year," Mr Plumb said. "In today's market growth is something that people think will be a challenge and if you can identify growth you'll be rewarded."
In today's market, growth is something that people think will be a challenge and if you can identify growth you'll be rewarded
Tom Plumb,
portfolio manager of the Plumb Funds
Still, gains could fizzle if the Fed does not cut interest rates this year, as widely expected. While the central bank has projected borrowing costs will stay around current levels until year end, investors are pricing rate cuts after the summer.
Elevated rates would likely weigh heavily on technology valuations, which have soared since the year began, said Max Wasserman, senior portfolio manager at Miramar Capital. Growth stocks are especially vulnerable to high borrowing costs, which threaten to erode the value of their longer-term cash flows.
Apple is trading at a forward price-to-earnings ratio of 26.5, while Microsoft's ratio is 27.4, compared to 18 for the S&P 500.
"You're seeing extremely high multiples in a rising interest rates environment because the market is betting the Fed will reverse its policies," he said.
"We think it's a faulty assumption and the risk-reward is not in your favour."
Scoreline
Arsenal 0 Manchester City 3
- Agüero 18'
- Kompany 58'
- Silva 65'
EPL's youngest
- Ethan Nwaneri (Arsenal)
15 years, 181 days old
- Max Dowman (Arsenal)
15 years, 235 days old
- Jeremy Monga (Leicester)
15 years, 271 days old
- Harvey Elliott (Fulham)
16 years, 30 days old
- Matthew Briggs (Fulham)
16 years, 68 days old
If you go
The flights
There are direct flights from Dubai to Sofia with FlyDubai (www.flydubai.com) and Wizz Air (www.wizzair.com), from Dh1,164 and Dh822 return including taxes, respectively.
The trip
Plovdiv is 150km from Sofia, with an hourly bus service taking around 2 hours and costing $16 (Dh58). The Rhodopes can be reached from Sofia in between 2-4hours.
The trip was organised by Bulguides (www.bulguides.com), which organises guided trips throughout Bulgaria. Guiding, accommodation, food and transfers from Plovdiv to the mountains and back costs around 170 USD for a four-day, three-night trip.
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The alternatives
• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.
• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.
• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.
• 2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.
• PayPal is probably the best-known online goods payment method - usually used for eBay purchases - but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.
Three ways to get a gratitude glow
By committing to at least one of these daily, you can bring more gratitude into your life, says Ong.
- During your morning skincare routine, name five things you are thankful for about yourself.
- As you finish your skincare routine, look yourself in the eye and speak an affirmation, such as: “I am grateful for every part of me, including my ability to take care of my skin.”
- In the evening, take some deep breaths, notice how your skin feels, and listen for what your skin is grateful for.
Scoreline
Man Utd 2 Pogba 27', Martial 49'
Everton 1 Sigurdsson 77'
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
England Test squad
Joe Root (captain), Moeen Ali, James Anderson, Jonny Bairstow (wicketkeeper), Stuart Broad, Jos Buttler, Alastair Cook, Sam Curran, Keaton Jennings, Dawid Malan, Jamie Porter, Adil Rashid, Ben Stokes.
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
