UBS strategist Keith Parker has upgraded Tech stocks to Overweight on the back of the improving relative growth/momentum, higher quality, strong pricing power, lower cost exposures and payout potential.
The analyst says valuation and rising rates still offer a risk to tech stocks, however growth/cycle “should matter more."
“Surging labor issues point to big upside in IT/software spend. Software & Svcs are favored over Semis, over Tech Hdwr. REITs upgrade is driven by solid growth amid inflation, better pricing vs lower cost exposures, and a cycle stage setup that should be relatively supportive,” Parket said in a client note.
Elsewhere, UBS is also Overweight on REITs, Healthcare, Financials and Energy, while being Underweight on Materials, Industrials, Utilities and Staples.
On Healthcare, P/Es are “still well below prior late cycle levels” says Parker while he expects the EPS momentum to further improve.
The analyst also downgraded Communication Services to Neutral from Overweight and said he prefers Interactive Media over Telecom.
By Senad Karaahmetovic