The tech sector has come roaring back — Amazon has risen more than 10 percent and Netflix has surged 19 percent in the new year. But if history is any guide, this comeback won’t last without Apple’s help.
But when Apple finally finds a bottom, there will be “a big rally” in tech, the analyst pointed out.
Technology has historically outperformed the market when Apple bottomed. The sector topped the S&P 500 over the next 12-month period by 7.2 percent and 21.9 percent when Apple troughed in 2013 and 2016, respectively, according to the bank.
Although seeing Apple’s negative impact on the tech sector, Bank of America still finds attractive valuations in tech companies, arguing they are already discounting risks from the trade war.
“We think the market is already pricing in much of the downside risk for tech, suggesting attractive risk-reward ratios from here, especially if we get a favorable trade deal with China. We remain overweight tech,” the analyst said in the note.
There’s more optimism that Washington and Beijing could move forward on a trade deal as President Donald Trump tweeted on Tuesday that U.S.-China trade talks are “going very well.”
The tech-heavy Nasdaq Composite is up 3 percent in January, posting its eighth positive session in nine on Tuesday through the first hour of trading with a bounce in the so-called “FAANG” names. The S&P 500 has gained 2.7 percent in the new year.