(Bloomberg) -- Growth stocks are the place to be for the long term, despite higher-for-longer interest rates, because they are more resilient in the face of recession, according to Citigroup Inc. quantitative strategists.
While growth sectors like tech have been eschewed in favor of value amid the recent surge in bond yields, strategists including Hong Li prefer growth as the possibility of a global recession looms for 2024.
“We continue to prefer growth in the longer-term,” Li wrote in a note. “It carries less overall macro risk and may provide more downside protection in a recessionary environment, while fully realizing the short-term risk of further rising interest rates.”
They're not alone. Strategists at UBS Global Wealth Management also like tech stocks, even after the recent market rotation out of the sector. Mark Haefele, chief investment officer, wrote in a note that concerns about higher-for-longer rates have offset optimism about artificial intelligence — something they think will cause broad sector upside, especially for software, Internet stocks and semiconductors.
The strategists' calls come after a bad few months for tech, with the Nasdaq 100 down 6.7% from its July peak through the latest close. The gauge is still up 35% this year, though most of the gains are attributable to a handful of names.
The recent pullback has taken the Nasdaq 100's 12-month forward price-to-earnings ratio to nearly 23 times, still above the average of 20.1 times for the past decade.
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