What You Need to Know
We review our technology positioning in a global, cross-asset portfolio given the way that the sector has dominated returns in recent years.
A key attribute of our positioning is remaining strategically positive on equities and underweight nominal long duration. We also retain our view of overweighting the US strategically within a global equity context. This view yields an overweight tech position compared with a 60:40 benchmark. We are also happy to hold a slight overweight to the broader tech sector in the US equity context.
The technology sector is “cheap” even after its rally. Of course, this assessment reflects a huge upgrading of long-run earnings expectations. We discuss to what extent these expectations are sustainable and whether the pace of earnings upgrades represents a problem.
We think there is a path that justifies the current run of capex. The challenge is whether one can have clarity on that path within a time frame that is short compared with the depreciation cycle of chips. This situation implies, we think, that investors are complacent about volatility.
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