2023: A Breakthrough Year for Tech Stocks?

February 15, 2023 (Investorideas.com Newswire) Last year was one of the worst periods for equity markets since 2008 with nine of the 11 sectors finishing in the red territory -technology being one of them.

Amid raging inflation, the US Federal Reserve launched a rate hike drive last year, boosting its benchmark interest rate by 425 bps vs the expected 75 bps at the beginning of 2022. With such a rise in borrowing costs, the potential profits of relatively riskier tech companies were dented while investors flocked towards more attractive bonds. Major tech stocks plummeted by staggering margins. Meta, for example, shed 65% in value, while Amazon manifested a decline of nearly 49% and Alphabet stocks tumbled close to 39%. 

Naturally, the tech-heavy Nasdaq Composite and Nasdaq 100 also lost nearly 32% in value, the largest decline among all major indices. While tech investors struggled during the bearish market squeeze, traders who seized the opportunity with stock CFDs managed to weather the storm with ease. In this regard, many platforms, like Invest Ecapitals, offer stock and index CFDs to help users explore the potential of these markets, regardless of their condition.

A broader optimism - 2023 can be an upbeat year for tech stocks

With the arrival of a fresh year, there is an optimistic sentiment prevailing among investors. Experts predict a vibrant year for the tech sector, anticipating a surge of nearly 20% in 2023. The growth might be spearheaded by the tech giants, software houses, and semiconductor firms, despite any potential macroeconomic and Fed-related headwinds. It's worth noting that tech stocks are currently the most undervalued since the 2009-2010 era, presenting captivating opportunities to long-term investors.

Reinforcing the positive expectations, January drew to a close with tech shares hitting a high note. The Nasdaq Composite bounced back with an impressive 11% gain this January while the S&P 500 registered 6% gains.

As part of the resurgence of tech stocks, Meta rose 26%, Amazon climbed 21%, Tesla skyrocketed 44%, and NVIDIA soared 39%. This turn of events is a glimmer of hope for tech enthusiasts and the market as a whole.

The favorable tailwinds

The optimistic outlook is largely a result of the Federal Reserve’s stance, as investors expect it to loosen the firm hold on monetary policy. In the first FOMC meeting of 2023, the officials indeed eased up on the rate hike pedal and announced a mere quarter-percentage-point increase in contrast to the 0.5-0.75-point hikes of the previous year. This shift was followed by a slowdown in inflation, which triggered last year's consistent rate hikes.

Presently, the "fear index" is also hovering below 20, significantly down from its peak at 34 in late 2022. Moreover, the "January effect" is in action as a successful January for Wall Street often leads to a prosperous year overall. To add to the tailwinds, know that back-to-back yearly drops in the S&P 500 are quite a rarity. As the index shed almost 18% in value last year, with tech stocks among the worst performers, there is a hopeful indication of a bright 2023 for the market.

Such favorable developments provide tech investors a reason to breathe a sigh of relief and keep their eyes on technology stocks. Several forums, like Invest Ecapitals, offer market players an opportunity to take advantage of the anticipated wave and to truly explore the potential that this market offers.

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