Barclays chief stock strategist says Covid recovery trade is over, go back into Big Tech

Published Tue, Jun 22 20214:45 PM EDTUpdated Tue, Jun 22 20215:06 PM EDT

The pandemic recovery trade has run its course, and now it's time to get back into Big Tech stocks, one market strategist told clients Tuesday. "We believe market leadership is likely to change from cyclical to secular growth stocks as the Covid recovery trade has mostly run its course. Secular growth stocks look favorably positioned to benefit from the digital transformation that got accelerated during Covid," Barclays head of U.S. equity strategy Maneesh Deshpande said in a note. Value and cyclical stocks shone in 2021, as investors turned to names that perform well in a recovering economy. But the growth theme is back in vogue as investors worry that much of the pandemic rebound has already been priced into those recovery names. "Following positive news on the vaccine front in November 2020, as the path to a cyclical economic recovery in 2021 became clearer, there was a rotation that began away from stocks with positive exposure to COVID-19 and into stocks with negative exposure to it," Deshpande said. "We think this rotation is now complete." Growth stocks are shares of companies that are expected to grow at a faster rate than the rest of the market. In particular, secular growth stocks follow a longer-term trend and are less influenced by the overall economy. According to Barclays, technology names are particularly well-positioned for the moment due to an acceleration of digital transformation during the pandemic. Tech stocks stand to benefit from the growth of e-commerce marketplaces, digital advertising, work-from-home technology and cloud infrastructure, the bank said. Barclays is bullish on FANMAG stocks — a group of mega-cap tech names including Facebook , Amazon , Netflix , Microsoft , Apple and Google-parent Alphabet . What's more, the bank believes these Big Tech names are relatively cheap now after lagging earlier this year. "We prefer FANMAGs as their valuations have declined to 2019 [year-end] levels," Deshpande said. Meanwhile, Barclays believes software stock valuations are currently expensive, so it prefers to stick with FANMAGs. Out of the tech giant names, Barclays likes Alphabet, Microsoft and Amazon in particular, as the bank expects these stocks to "hold on to their Covid market share gains and continue to benefit from the acceleration of digital transformation." — CNBC's Michael Bloom contributed reporting.

The logos of Amazon, Apple, Facebook and Google.

Reuters

The pandemic recovery trade has run its course, and now it's time to get back into Big Tech stocks, one market strategist told clients Tuesday.

"We believe market leadership is likely to change from cyclical to secular growth stocks as the Covid recovery trade has mostly run its course. Secular growth stocks look favorably positioned to benefit from the digital transformation that got accelerated during Covid," Barclays head of U.S. equity strategy Maneesh Deshpande said in a note.