Press comment: Tech suffers in market sell-off

Following today’s market sell-off Quilter Investors head of investments, Anthony Gillham comments:

“One key factor to take note of here is that the incredibly narrow rally this year, which has been driven by growth in only a handful of stocks in the US, is now driving the corresponding correction. Growth stocks, in particular tech companies with high valuations based on expectations for future expansion, are especially vulnerable to a recalibration of this nature and have subsequently suffered.

“For long-term investors looking at markets today it is important to bear in mind some of the key fundamental factors. Little has really changed for the global economy. Strong growth in the US continues and the macro economic environment remains stable, with reasonable global growth, despite some pockets of weakness. Corporate earnings growth is reasonably strong and ultimately that is the fundamental factor underpinning the case for any stock.

“Active managers that eased off from following the US tech stock rally will likely be better positioned to defend during this sell-off. In particular, diversified portfolios with a more defensive asset allocation will be better placed to weather the storm. Likewise, we expect to see many of our active managers demonstrate value in this environment, whereas passive funds, especially those with a market-cap weighted exposure to big tech in the US, will struggle.”

To read the commentary in full, including reflections from portfolio managers Paul Craig and Stuart Clark please visit the Shared Thinking page.

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