The tech sector has provided a much-needed rally for the entire market during these uncertain coronavirus times. But this blockbuster rally is far from over. Experts expect another tech stock rally, one that could also help boost the markets even further as the US gets into the next phase of its economic recovery.
Mega cap stocks like Microsoft, Amazon, and Apple are currently well below their peak even after the recent rally. These companies are known for their deep pockets and revenue. As long as these factors hold, they are expected to increase in value by between 20% and 25% over the coming few months. The tech rally is also expected to continue well into 2021.
The news is definitely a major boost for US financial markets. The coronavirus has disrupted every aspect of US life. Although we have seen some signs that a market recovery isn’t that far away, US stocks have remained very volatile in recent months. But the projected tech rally could just be the good news investors have been waiting for.
Many experts agree that the tech sector was already positioned to leverage the disruptions of the COVID-19 pandemic. The first phase of growth came as demand for online consumer services, cybersecurity, and cloud services grew.
As more and more people decided to work from home to evade the virus, the need for consumer services like online shopping went up massively. This is why companies like Amazon saw record sales during the quarantine.
Working from home also meant that most companies had to migrate most of their operations online, something that ensured cloud services and cybersecurity were in huge demand. As a result, tech companies in these areas saw a sharp increase in stock value.
However, experts note that there’s a second phase of growth around tech. They argue that hopes of a government-led stimulus to jumpstart the economy are hanging on a thread after congressional republicans and democrats failed to agree on a deal.
As a result, investors are more likely to move their money towards less risky stocks, and this would largely include large-cap tech companies like Apple, Amazon, Alphabet, Microsoft, and others. This influx of capital is likely to boost stock value and promote another stock rally in the near term.
Some experts also feel that the experience of working from home occasioned by the pandemic could pave a new trend on how people work. Although as the economy reopens many people will report back to their physical places of work or business, it’s expected that a sizable percentage will continue working from home or remotely for years to come.
As such, technologies that make remote work possible including cloud services are expected to see increased and steady growth. This will be one of the driving factors of a second tech rally in the stock market. But there are still some risks as the US heads into the election in November. Until a clear winner is announced, investors will remain jittery and this will likely spook the markets.