It is "too early" to get back into tech investments, according to UBS's head of equities, following a tough year for equity investors.
Last year saw the S&P 500 decline 18.1%, including dividends, and UBS's David Lefkowitz noted it was most challenging for some of the most expensive stocks in the market.
There was a "pretty good correlation" between a share's price/earnings multiple and how it performed last year, with shares trading at high multiples of earnings - ie more costly - at the start of the year falling most.
Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN), Tesla Inc (NASDAQ:TSLA), Microsoft Corporation (NASDAQ:MSFT) and Meta Platforms Inc (NASDAQ:FB) were the five stocks that detracted most from the S&P 500 return, accounting for 19% of the S&P 500 market cap in 2022 and 8.7-percentage-points of the S&P 500 return.
This was interesting, wrote Lefkowitz in a blog post, noting that this was also "somewhat of a mirror image of 2020 and 2021 when many of these stocks were key drivers of market gains".
Many of the most expensive stocks "suffered from the surge in interest rates (which weighed on valuations) as well as a slowdown in segments of tech such as e-commerce, digital advertising, and cloud computing", Lefkowitz wrote.
"Going forward, we think it is still too early to get back into ‘tech’ stocks," he concluded.
"While valuations for growth stocks are now less demanding, they are still high relative to value stocks. And we think some tech companies may still be vulnerable to earnings downgrades in the months ahead as customers continue to digest"