There is a long-standing debate over the effects of higher interest rates on the stock market and earnings.
Some economic analysts believe that when the Federal Reserve raises interest rates, it signals that the economy is doing well and that investors should put their money into stocks. Others believe that higher interest rates make bonds more attractive, drawing money away from stocks and into bonds.
Still others believe that higher interest rates have little effect one way or the other.
Regardless of which camp you fall into, the market rallied on Wednesday as the Fed moved to raise interest rates and pledged to keep raising them as much as needed to fight the rising inflation weighing on the U.S. economy.
According to Wedbush analyst Dan Ives, the market’s response to the upside following the Fed’s hike made a lot of sense.
“I think it’s a bright green light to own tech stocks here,” Ives said Thursday on CNBC, adding that the sector is the most oversold he has seen in five years.
The Fed “ripped the Band-Aid off” by laying out a clear path for a more aggressive strategy of ongoing rate increases in the months ahead, Ives explained, pointing out that the Fed’s shift away from its stimulative stance took a lot of the uncertainty out of the markets.
Ives also said he believes the tech has likely hit bottom and that some of his top picks are names like Apple (AAPL), Microsoft (MSFT), and Google’s Alphabet Inc (GOOG, GOOGL).
“We believe tech stocks from here could be up 25% rest of the year,” the analyst said.