Fund manager says a ‘turning point’ for Big Tech is near. Here’s what he’s watching

Next week could turn out to be crucial for tech investors looking to re-enter the stock market, according to an investment director at Swiss fund manager GAM. Julian Howard, multi-asset investment director at GAM, said the week beginning Dec. 12 would be a “super week for a potential turning point” in tech stocks. Several macroeconomic datasets are scheduled to be released next week, including U.S. inflation. The consumer price index, a broad-based measure of goods and services costs, is due to be released on Dec. 13. “If we get a headline easing from U.S. CPI from this point, then I think that’s going to look much more like a trend,” said Howard, who manages more than $2 billion at GAM. “Once we get that expectation that inflation will ease, the Fed can take its foot off the gas.” The U.S. central bank has hiked interest rates into the 3.75%-4% range and is expected to raise rates by another 50 basis points later this month. Meanwhile, the annualized inflation rate appears to be on a downward trajectory after it fell to 7.7% in October from 8.2% in September. When asked on “Squawk Box Europe” where investors should be looking to put their money, Howard said it’s “got to be large cap tech.” The tech-heavy Nasdaq Composite is down around 25% this year as the Federal Reserve has increased borrowing costs. However, these stocks are set to benefit if the Fed eases its tightening, Howard said. “I think that [The Nasdaq] could reverse very, very nicely once we get a bit of relief,” he added. He described Big Tech as “the epicenter of interest rate uncertainty because it has those sorts of long-run revenue streams which are most sensitive.” Not everyone shares this view, however. The 9.1% “fabulous” rally in Nasdaq over the past month is unlikely to be sustained, according to Ben Jones, director of macro research at Invesco. “I do think this is a bear market rally,” he said. Jones expects stock markets to fall further in the first half of 2023 after companies report declining earnings. He said the real economy has yet to feel the “scale and speed” of the interest rate hikes this year. But when the impact of the rate hikes is seen, companies will begin reporting a decline in earnings as the economy contracts, according to Jones. “I think it’s quite bold to suggest there’s not going to be some bad news coming through in earnings over the course of 2023. I just don’t think we’re positioned or priced for that at the moment.”