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Follow on Google News | Tech continues to drive markets as investors await two key events: the US debt-ceiling resolution aBy: Edward Jones
There may be a few reasons behind the recent technology outperformance. First, growth sectors were the biggest laggards last year, and they experienced the sharpest declines in valuations, perhaps making the technology and growth areas more appealing to investors looking for bargains. Secondly, many large-cap technology stocks have become part of a defensive strategy more recently. These companies have certainly shown resilience through this past earnings season, highlighting their defensible business models and strong financial positions, and returning value to shareholders through share-repurchase programs. Where do we stand on the U.S. debt ceiling? A deal seems imminent Part of the uncertainty that investors face, near-term of course, lies in the ongoing U.S. debt-ceiling negotiation. However, according to recent reports, a tentative deal is taking shape ahead of the June 1 noted deadline (the X-date) that could increase the debt ceiling and cap federal spending for two years, except for the military and veterans2. Some other details include a potential 3% rise in defense spending next year, a measure to upgrade the nation's electric grid, and permits granted for pipelines and other fossil-fuel projects2. There is also a focus on rescinding some of the $80 billion allocated for the Internal Revenue Service as part of the Biden administration's Inflation Reduction Act2. Opportunities may be emerging for equity and bond investors Overall, we would expect the markets' recent narrow leadership to potentially persist in the near term, as investors gravitate toward an approach that favors both technology and growth sectors and cash-like bonds. Sources: 1. Factset. 2. Bloomberg End
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