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TECH SECTOR LEADERSHIP REMAINS INTACT DESPITE RECENT SELLOFF, TRUIST'S LERNER SAYS

Technology stocks will remain in their market leadership position and deserve the benefit of the doubt notwithstanding a recent pullback amid worries over stretched valuations, according to Truist's Keith Lerner.

Tech stocks have witnessed a deep selloff in recent weeks, with the S&P 500 tech index .SPLRCT shedding about 3.2% in November compared with the broader S&P 500 .SPX, which is off 1.1%.

This sparked concerns that tech stocks may be losing their shine, leaving the market heading for a possible correction. But Lerner argues that this is not the case.

Markets have seen one of the strongest six-month rebounds in history, with the S&P 500 advancing 38% from April lows and tech stocks rallying 78%. Semiconductor stocks surged more than 120%.

This suggests that "recent market weakness" is a "reset of stretched short-term prices and elevated expectations," Lerner says.

Furthermore, there has been no noticeable fundamental decline in corporate profits, which has been the main driver of market gains. Data shows that forward 12-month earnings estimates for the S&P 500 have risen once again to record highs, led by tech.

The upsurge in debt financings amid massive spending on artificial intelligence also shouldn't worry investors as "most companies are adding leverage from a position of strength -- supported by high credit ratings and robust free cash flow margins", Lerner says.

"Pullbacks are never comfortable, but they are the admission price for participating in the potential of stronger long-term stock market returns," Lerner says.

(Chibuike Oguh)

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