Technology companies, and tech stocks could get a near term bump if the Federal Reserve decides to increase the interest rates. That according to a Merrill Lynch research note, this morning.
bq. Tech is one of the most cyclical sectors and tends to outperform during periods of rising rates. Tech stocks have outperformed the market by an average 60% one year after the first rate hike over the last three cycles (25% excluding the bubble). Semis and Wireless do especially well in the early stages of rising rates; Hardware, Storage, and Services don’t perform as well during Fed tightening. If not now, Fed tightening would be negative for tech down the road. If the Fed were to tighten in late-2004, tech activity should slow by mid- to late-2005.