By Christopher Hamman
Growth stocks, particularly technology stocks, have outperformed the broader stock market since the lows in March. The general consensus is that large-cap technology stocks are most insulated from the coronavirus pandemic because most do not have direct exposure compared to retailers, for example.
This shift has propelled technology stocks to all-time highs and has left valuations stretched on a historical basis. Price action in certain stocks, such as Tesla, points towards a potential market bubble. The FAANG stocks have also contributed to leading the NASDAQ to all-time highs.
We believe that certain technology companies that do not have high exposure to advertising revenue, namely Apple and Amazon, can continue higher. Companies such as Facebook and Google could see more difficulty as large corporations slash advertising budgets, which will not bode well for these specific technology companies.