Fears of inflation create “extraordinary” technical prospects: Invesco
When rising government bond yields put pressure on tech stocks, Invesco’s Kristina Hooper seeks to put money to work.
Hooper, who oversees $ 1.3 trillion in net worth, predicts the group’s growth potential will ultimately outweigh inflation fears.
“Every time we see a tech sell-off, this is an opportunity to buy some of the attractive names that have been on investors’ wish lists as the long-term potential for tech is simply extraordinary,” said the company’s chief global strategist Markets said CNBC’s “Trading Nation” on Monday.
In the past five weeks, the tech-heavy Nasdaq is down more than 5%, while the benchmark 10-year Treasury note yield is up 40%.
“Usually there is a digestive period first when the yields rise to higher levels,” said Hooper. “In fact, stocks do well in a rising interest rate environment. So this is an opportunity to get into technology as it is likely to do better even in the next 12 months.”
But first, investors may need an iron stomach to overcome instability. Despite the strong performance of the Nasdaq on Monday, it warns of higher volatility.
According to Hooper, the 10-year return, which is now 1.69%, could soar to at least 2% in the next few months. She speculated that the level would likely drop the Nasdaq by 10%.
“This is likely a very strong economic recovery,” she said. “We shall see that this manifests itself in an increase, a significant increase in the 10 years.”
The return has increased by more than 85% so far this year.
Hooper said she expected Covid-19 vaccinations and continued reopenings would create pent-up demand in the economy. However, it does not ring.
“While I expect inflation to rise, I believe it will only be temporary,” said Hooper. “The longer-term forces like innovation and demographics should put pressure on prices.”
Overall, long-term investors should have broad exposure to stocks, including cyclicals.
“The world will go into economic recovery mode,” said Hooper. “Indeed, some countries are already there and there will be a strong recovery.”
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