Some say the slide in tech stocks has many investors rushing to buy the dip, but now is the time to be cautious. Communication services and information technology stocks have been two of the worst-performing sectors in the S&P 500 this quarter as they have fallen into a pullback from their July highs. Communications service prices are down more than 11% from their 52-week high, and information technology prices are down more than 12% from their recent highs. For much of this year, any decline in fast-growing technology stocks proved to be a buying opportunity for investors, as the promise of artificial intelligence kept traders from staying away from these stocks for long. Investors were once again buying dips during midday trading on Tuesday. But the prospect of slower economic growth after a mixed jobs report in August and the possibility that the Federal Reserve may begin cutting interest rates starting next week have many investors looking for yield elsewhere in the market. “We’re not overweighting technology, but equal weighting,” said Ken Mahoney, CEO of Mahoney Asset Management. “We’ve been overweight because of the narrow scope of market participation. That’s spreading, or it’s going to The spread will spread even more over time.” The expanded participation may help sectors that have lagged in the market this year, such as more defensive sectors such as health care, financials and industrials, which should improve after underperforming this year. Continue to rebound. Bonds trump technology? Rob Williams, chief investment strategist at Sage Advisory, predicts that industries that are late in the cycle, especially high-quality companies, are best served by a certain degree of diversification. For the overall portfolio, he likes to increase allocations to bonds rather than the stock market. “There’s still some room for growth later in 2025, but that’s more than a full year away,” Williams said. “I just think the prudent thing to do right now seems to be more diversification in terms of valuations and concentration. In fact, Savita Subramanian, equity and quantitative strategist at Bank of America, said on Monday that she prefers utilities to tech stocks, saying “quality and earnings are the new growth and… P/E expansion,” as she expects revenue to contribute more to investors’ total investment. Returns over the next decade will be higher than over the past decade. However, other investors are bullish on big tech stocks, saying lower valuations, solid balance sheets and further gains in artificial intelligence make the sector increasingly attractive now. “We think this is still a long way off and that, in fact, artificial intelligence may exist,” Jason Draho, head of Americas asset allocation at UBS Global Wealth Management, told CNBC’s “The Exchange” on Monday. Upside risks, that’s the capex story for next year, however, when it comes to the Seven, Draho is a bit more picky. He prefers names like Apple, Microsoft and Nvidia that better understand the AI story to Tesla.
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