(Bloomberg.com) — It seems that the drubbing witnessed by global technology stocks this year is not over.

That’s the message from many strategists and fund managers, who expect this year’s rout to deepen in the near term as the Federal Reserve aggressively tightens monetary policy to fight inflation, raising the specter of a recession. 

Analysts predict tech companies’ earnings growth will increase in the future, despite the possibility of an economic downturn. Investors are overweight the sector in their portfolios and expect to profit by buying when prices dip, according to Bank of America Corp.’s quantitative strategists. Until that optimism fades, tech stocks won’t find a bottom, the firm says.

Last week’s swift rebound isn’t convincing the skeptics. They gained 7.2% to snap seven weeks of losses. 

“While the rebound feels good it is not unusual to have bear market rallies,” said Peter Garnry, head of equity strategy at Saxo Bank. “Investors should not forget that the underlying commodity and supply chain dynamics will continue to underpin pressures on inflation and interest rates.” 

Global markets have seen a decline in technology shares due to concerns about rising rates impacting earnings growth. Since its peak in November, the tech-heavy Nasdaq 100 had lost $4.3 trillion and has entered a bearish market. Since the record, Alphabet (NASDAQ), Microsoft (NASDAQ) and Amazon (NASDAQ) have all fallen 20% to 20%. 

“People used to buy the dip, but the weakness has gotten to the point where people are wondering whether tech should be avoided altogether,” said Robert Stimpson, co-chief investment officer at Oak Associates, which manages about $2 billion. 

Read more: Goldman Says Hedge Funds’ Rush to Dump Growth Wasn’t Fast Enough

Some bargain-hunters are encouraged by lower valuations. Nasdaq 100 trades at 21 times expected profits for the next twelve months. This is down about one third of its 2020 peak, and well below its 5-year average of 23. Alphabet is at 17 – down 40% from its peak.

There’s “exceptional” long-term opportunity in tech stocks given the decline in multiples over the past six months,  said Katie Koch, chief investment officer for public markets equity at Goldman Sachs Asset Management, said in an interview with Bloomberg TV last week. 

The average return potential of stocks on Nasdaq 100 dropped to 28%, from over 40% earlier in the month. This is a sign that sentiment has changed as analysts have lowered their price targets for individual companies by 12 months.

After Meltdown, Tech-Bottom Signals Have Yet to Scream ‘Buy Now’

Garnry suggests that you analyze the collapses of the 1970s or the dotcom boom to determine the environment in which we are currently operating. 

“These drawdowns had multiple rebounds, periods of relief, before going lower again, so today’s investors must be extremely careful of not being fooled by a short-term rebound,” said.

Tech Chart for the Day

The Chip stock market just experienced a stunning run. After two weeks’ declines, the Philadelphia Stock Exchange Semiconductor Index soared 8.1% last week. It was also the largest gain in two months. A rally in the wider market, as well as strong results by companies like Marvell Technology Inc. (NASDAQ:) fueled this rebound. 

Top Tech Stories

• US-listed Chinese stocks, including ecommerce giants, are listed on the US Stock Exchange Alibaba (NYSE:)  jumped, putting them on track to wipe out their monthly losses. Investors felt reassured by the ease in which lockdowns are being lifted in major cities, and positive economic data.
• According to sources familiar with the matter Tesla (NASDAQ) and Volkswagen OTC (OTC) will keep their workers in Shanghai’s factories separated by so-called closed loop management system systems up to June 10. This, despite the fact that authorities permit most residents to freely move around the city amid declining Covid-19 cases.
• Telecom Italia (BIT:) is seeking an enterprise value of about 20 billion euros ($21.5 billion) for the landline network it plans to sell to Italy’s state lender and a group of international funds, according to people with knowledge of the matter
• A lobby group including Apple Inc (NASDAQ:) and other technology giants operating in India called out the country’s authorities for misunderstanding how patent fees work, following local officials’ dispute with Xiaomi (OTC:) Corp.
• Tiger Global Management has further reduced its holding in Just Eat Takeaway (AS:) after a slump of more than 70% in the food-delivery service’s share price

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