(PresidentialInsider.com)- Due to surging bond yields, hedge funds are selling growth-focused technology shares at a rate not seen in the last ten years.
In four sessions between December 30 and January 5, hedge funds dumped tech stocks as interest rates spiked. The four-session unloading marked the largest record sale in more than ten years since Goldman Sachs started tracking the data.
Because increased debt costs can hinder their growth and make their future cash flows appear less valuable, tech stocks are viewed as sensitive to rising yields. In last week’s trading the tech-heavy Nasdaq Composite sold off more than 3 percent, underperforming the S&P 500 which dipped only 1 percent.
The rate spike resumed on Thursday, with investors assessing the Fed’s faster-than-expected policy tightening. The yield on the benchmark 10-year Treasury note hit a high of 1.75 percent, marking an increase for a fourth straight day.
The jump in yields began after the Federal Reserve issued the minutes from its last meeting showing the central bank is likely to become even more aggressive than expected on raising interest rates and tightening monetary policy.
The dumping of tech stocks by hedge funds is driven almost entirely by long sales, according to Goldman Sachs. The Wall Street Journal reported that selling was driven primarily by software and semiconductor stocks.
The unloading of tech stocks was felt by many big-name Tech companies. Shares in Netflix fell over 8 percent in the first week of 2022. Microsoft likewise dropped 6 percent while Alphabet, Google’s parent company, fell 4 percent.
However, according to Dan Ives of Wedbush, the tech sell-off is creating a massive buying opportunity for investors.
While 2022 will likely remain volatile for tech investors given the Fed’s more hawkish policies coupled with the supply chain disruptions impacting semiconductors, Ives believes that volatility is par for the course when purchasing strong growth tech stocks at bargain prices.
Calling the potential change in Fed policy “the straw the broke the camel’s back” after the bad start of 2022, Ives believes it isn’t time to “throw in the white towel on the tech bull cycle.”