Liontrust: our fund managers’ outlook for 2022 - Flipbook - Page 5
ROBIN GEFFEN, MANAGER ON THE LIONTRUST TECHNOLOGY FUND
Technology bears are mistaken
No sector divides investor opinion quite as sharply as the Technology sector. Those
investors who regard the Technology sector as a long-term diversified buy and
hold have been very well rewarded over the last five years and
more with strong returns and strong performance.
Those of the opposite opinion, who see the
Technology sector as a narrow investment into a
volatile sector, have missed out on good
long-term returns as they endlessly wait
for a correction in the Nasdaq.
Over the last couple of months, bears of the Technology sector
have pointed to the increasing likelihood of three rises in the US
interest rates in 2022 and the negative effect this will have on the
returns. The bears believe that Technology stocks, as long duration
assets, will strongly underperform as US interest rates and the yield
on US Treasuries rise.
We believe that Technology bears are mistaken here as although
the Technology sector does have longer earning duration than the
broader stock market, its sensitivity to US interest rates is actually
lower than the broader market. This is due to the Technology sector
being less indebted than the broader market, thus reducing the
impact of higher interest rates.
Recently, we have seen Covid lockdowns across Europe and
the emergence of a new Covid variant Omicron. With this,
consensus opinion has considerably shifted, with the previous
view of three interest rate rises in 2022 being replaced by a
new consensus opinion of just one US interest rate increase next
year, thus further undermining those of a bearish disposition on
the Technology sector.
The sector continues to provide a rich variety of investment
opportunities by size and sub-sector as Technology is increasingly
embedded in our daily lives.
The Technology sector offers a wide range of stocks from mega
caps like Microsoft and Apple down to fast growing small cap
stocks. The range of sub-sectors offers scope to invest in steady
compounding stocks, fast growth stocks or stocks of a more
cyclical nature.
Liontrust Views: Outlook for 2022 - 5