Global Technology strategy - March 2022
- 22 April 2022 (5 min read)
Having recently engaged with many management teams, there is a confident tone as to the outlook for business
The technology sector outperformed the broader equity index in March
Rising interest rates and the war in Ukraine weigh on investors sentiment
We would be inclined to use share price weaknesses as an opportunity to invest
What’s happening?
During March, the MSCI World index gained 4.8%1 . The technology sector outperformed the broader equity index with the MSCI World Information Technology index gaining 5.1%1 . [All index returns provided in GBP].
After a weak start to the month , global equity markets rallied into the second half to finish in positive territory overall. More constructive news flow around peace talks in Ukraine, further strength in economic activity and renewed optimism that major central banks will be able to rein in inflation led to an improvement in sentiment.
In the US, consumer sentiment continued to soften as inflation reached a 40 year high of 7.9%2 while the labour market demonstrated further strength with nonfarm payrolls beating expectations, lower unemployment at 3.8%2 and further acceleration in wage growth. The Federal Open Market Committee raised its benchmark interest rate by 25bps to 0.50%2 and indicated further increases will be needed while an announcement on plans to reduce its balance sheet is expected shortly.
Portfolio positioning and performance
During March, amongst our investments, notable outperformers during the month included owner and operator of communication real estate American Tower, electronic design automation (EDA) company Cadence Design Systems and semiconductor company Microchip.
Conversely, we saw weakness in other semiconductor companies including AMD, Micron Technology, TSMC and Qualcomm. Qualcomm detracted most as expectations of a slowdown in consumer demand has weighed on sentiment. We acknowledge the possibility of a slowdown in mobile handset demand but are encouraged by its success in new premium handset launches and think the company is well positioned given its competitive connectivity solutions and significant opportunity in various Internet of Things applications. We also saw weaker performance from Chinese internet and gaming company Tencent after reporting results that were below expectations, segments such as advertising remain soft as the economy continues to slow down.
During March, we sold our position in Alkami, the small cap provider of e-banking solutions. We added to our investments in cybersecurity companies CyberArk and DarkTrace, whilst starting a new position in cloud-based data warehouse business SnowFlake.
Outlook
The market sentiment during the month was completely and rightly dominated by the events in Ukraine after Russia’s invasion late in the previous month. As a result, global equity markets declined as investors opted for more risk adverse asset classes.
Subsequently, led by the US market, equities rallied after the US Federal Reserve raised interest rates for the first time since the Covid pandemic began. The move had been widely anticipated and the current expectation is for a further eight rate rises in 2022.
We believe that markets are likely to remain volatile whilst the geo-political uncertainty remains. However having engaged with many management teams of our investments in recent weeks, there is a confident tone as to the outlook for business which is encouraging especially in light of the pull back in shares and valuations that many companies have experienced since the start of the year.
In a few weeks’ time we will begin to get insights as to how business conditions are holding up as companies start to report their first quarter earnings. Overall, we feel confident with regards to the prospects of the technology sector given the attributes of balance sheet strength, strong cash flow and underlying drivers for growth that our investments benefit from.
No assurance can be given that the Global Technology Strategy will be successful. Investors can lose some or all of their capital invested. The Global Technology strategy is subject to risks including; Equity; Smaller companies; Currency; Industry sector or region; Changing technology; Emerging markets; Liquidity.
- U291cmNlOiBCbG9vbWJlcmcgYXMgb2YgMzEvMDMvMjIsIHBlcmZvcm1hbmNlIGluIEdCUA==
- U291cmNlOiBCbG9vbWJlcmcgYXMgb2YgMzEvMDMvMjIsIHBlcmZvcm1hbmNlIGluIEdCUA==
- U291cmNlOiBCbG9vbWJlcmcgYXMgb2YgMzEvMDMvMjI=
- U291cmNlOiBCbG9vbWJlcmcgYXMgb2YgMzEvMDMvMjI=
- U291cmNlOiBCbG9vbWJlcmcgYXMgb2YgMzEvMDMvMjI=
Disclaimer
Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.
Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. The strategies discussed in this document may not be available in your jurisdiction.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Please note that the management company reserves the right, at any time, to no longer market the product(s) mentioned in this communication in a European Union country by notification to its authority of supervision in accordance with European passport rules. In the event of dissatisfaction with the products or services, you have the right to make a complaint either with the marketer or directly with the management company (more information on our complaints policy available in English here). You also have the right to take legal or extra-judicial action at any time if you reside in one of the countries of the European Union. The European online dispute resolution platform allows you to enter a complaint form (by clicking here) and informs you, depending on your jurisdiction, about your means of redress (by clicking here).
Issued in the U.K. by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
Risk Warning
The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.