Tech stocks still attractive in long term, UBS Wealth Management CIO says

Well, you know any data point that suggests that there’s too much strength in the economy or not enough strength. You know if it’s not Goldilocks, I’m sure the market will react in the short term. But we’ve we’ve had a lot of fear that inflation is is really kind of stalled here now and won’t go go lower. So we could also have surprises, positive surprises that send the market higher. Your notes by the way, you say rate cuts, they’re not cancelled, they’re just delayed. I’m going to move to the equity market. Apple, the big story today, part of the Magnificent 7 stocks, I want to ask you is there still concern about over concentration in these big cap tech stocks or have their earnings proven that these are safe places to put money in that this narrative is still intact? Well, I think I think the way we look at it is in our base case where we see the inflation picture improving and rates start to be cut, we would expect the rally to broaden out and you know could even extend to small caps say in the United States and Europe. But we’ve also had this real focus on quality stocks, stocks that have very strong balance sheets, strong stocks that have pricing power are improving their dividends, improving their buybacks, have recurring revenues. And as we’ve seen, you know, this week and I think last week, a lot of these large tech stocks still fit that bucket. And so we think they’re still attractive, particularly in the longer term. You know, I want to go back to your comment about small caps. If you’re watching worldwide exchange, I often give the guests a hard time about small caps because everybody keeps calling for a rally in small caps. I’m looking right now they’re just flat year over year. So just very quickly when it comes to small caps, what are going to be the catalyst for these small caps to move higher because when we had six cut expectations, they still were laggards and then we went down to three cut expectations, they were laggards. Now we’re on possibly, I know you’re not in this camp, but possibly a no cut expectation and again they’re laggards. Well, yeah, I I think that you’re absolutely right that it is tied to the outlook for how how well these companies will be able to refinance at better prices in the future. So that that’s catalyst. Again we we see two rate cuts in the back half of the year still given this kind of more dovish outlook still from the Fed and just pointing out that in in that case that would be the kind of the the extreme end of of what could rally. But we would also expect you know that would work, but even if it’s not as positive for small caps, a more benign environment should help the overall rally kind of spread out even in the S&P 500. You know to your point though materials and financials have outperformed over the last month or so or last couple months actually. So we have seen that broadening. I want to talk to you about fixed income, specifically US bonds and also global bonds have bonds. The yields there, have they become so attractive that it’s actually pulling from the equity market? We know that money markets certainly are when you get about 5% in the money market, yeah well we’ve seen our clients globally looking at you know those attractive rates at the shorter end and absolutely they they’ve been moving there and it’s it’s very different than a few years ago when you were looking at bonds and just looking for capital appreciation. But you had no yield and now you have yield and the potential for capital appreciation. I think, I think for us we would we see spreads very tight kind of around the world and so we would focus on quality probably you know especially like investment grade 5 to 10 year maturity. So you’re, you know, you’re somewhat cushioned if we have something outside of our base case and rates stay even higher for longer.