Embrace ‘Mullet Trading’ Says Jefferies Analyst

The recovery in tech stocks could be another year from now, and the recovery could even take the form of an iconic hairdo, according to one longtime tech analyst.

“We believe in the mullet trade…where it’s kind of a business in front, party in the back,” Till told Yahoo Finance Live (video above), referring to the haircut that became popular from the 1970s through the 90s. “I hope this works. [That] it could just end up in a long, really hard 2023 – that’s a risk, and it could end up with him coming back in the middle of 24 instead of sometime early next year.”

Till added that the tech sector is likely to experience more “pain” in the first half of 2023 before reaching a “smooth, long and exciting” rally in the second half of the year.

BRISBANE, AUSTRALIA - NOVEMBER 26: Australia's Cameron Smith shakes hands with Australia's Jason Scrivener after round completion during Day 3 of the 2022 PGA Australian Championships at the Royal Queensland Golf Club on November 26, 2022 in Brisbane, Australia.  (Photo by Andy Cheng/Getty Images)

Cameron Smith of Australia shakes hands with Jason Scrivener of Australia at the Royal Queensland Golf Club on November 26, 2022 in Brisbane, Australia. (Photo by Andy Cheng/Getty Images)

As tech companies struggle to chart a recovery in stock prices, they are also having to dust off their recession scenarios as businesses take cost control measures and consumers cut spending.

The slowdown in demand has also added to the thundercloud looming over tech companies right now.

“In our survey, 80% to 90% of tech companies will show a slowdown in growth in 2023,” Till said, “and tech stocks are not working to slow growth.”

In the short term, according to Till, profit multiples will continue to decline and then stabilize. As a result, some portfolio strategists are hoping that the Nasdaq (^IXIC) high-tech stocks will simply rip off the band-aid and cut their forecasts for this year.

“Hopefully companies are behaving very ugly because it will be in their best interest next year,” Paul Meeks, portfolio manager at Independent Wealth Solutions Management, told Yahoo Finance Live recently. “And if we see inflation under control, the latest Fed rate hike, the nastiest of all possible nasty recession numbers reflected in these tech companies’ forecasts, I’m going to feel pretty good, because in the meantime, some of those tech names’ estimates are going to be right.” .

Some companies, such as Amazon (AMZN) and Salesforce (CRM), have already started the year cutting operating costs through layoffs. Meanwhile, semiconductor companies have already warned of declining demand, which could eventually put them in first place on the recovery curve.

“Perhaps semi-finished products and the Internet [stocks] there will be those who will return first,” Till said. “I think the software still has some lag because they have recurring contracts and it takes a while for that to spin up before you see the weakness.”

Brad Smith is the host of Yahoo Finance. Follow him on Twitter @thebradsmith.

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