Technology giants are really "hedging", banking crises are no longer important.
With bank stocks once again in turmoil, technology stocks are being seen as something of a safe haven. Last year was a completely different situation.
Tech companies continue to outperform the market, with Meta joining Microsoft and Alphabet-C this week in announcing optimistic results.
Admittedly, after a year of declining revenue, Meta's lower-than-expected threshold for success is relatively low. However, investors seem less pleased with the company's significant cost-cutting measures and reduced investment in the metaverse.
As bank stocks continue to fluctuate, tech stocks are seen as something of a safe haven. This is a far cry from last year's situation.
After falling 33% in 2022, the NASDAQ Composite Index has risen 13% this year, while the S&P 500 has risen only 5.6%.
Deutsche Bank strategist Jim Reid describes it as a "tug of war" between tech stocks pulling up and bank stocks pulling down. But tech stocks may also provide a glimmer of hope for an increasingly bleak outlook.
Economic growth may be slowing, and a recession may be on the horizon later this year. The US stock market may already be largely reflecting this. Of course, the outcome could be worse than expected.
Inflation has not disappeared, and expectations for further Fed rate hikes have not disappeared either.
According to the CME FedWatch Tool, the market expects a 75% chance of a 25 basis point rate hike next week.
When the Fed began raising rates last year, everyone was talking about whether it would end in a hard or soft landing. Now, it seems that rates are likely to remain at a high level regardless of whether the economy is in recession or not.
One side will ultimately win this "tug of war."
However, it is difficult to imagine tech stocks being able to withstand sustained declines in other sectors.