SENTIMENT in the stock market is always finely balanced, but now feels like a particularly delicate time.

By common consensus, economies are heading into a period of low growth and many will likely fall into recession. Inflation is leaving individuals poorer in real terms and businesses will be feeling the squeeze soon, if they aren’t already.

Yet the mood in stock markets is more positive than at perhaps any point this year. Prices have been rising for the past month as investors jump on any positive news that suggests inflation could be peaking, or interest rate rises slowing down.

That makes sense when you consider that it is the job of the market to anticipate and move ahead of economic changes. The market has been falling for most of this year in anticipation of tougher times to come and now, as the economic pain is being felt in earnest, it has already priced in a slowdown. Having started the year priced at around 24 times expected earnings, the S&P index representing the US stock market has been as low as 15 and stands today at about 17.

If news on inflation continues to improve, and in particular if markets gain confidence that the end of interest rate rises are in sight, then the recovery could gather momentum. There is clearly still the risk of the opposite scenario as well – that inflation remains stubbornly high and the downturn is worse than feared – which would likely trigger another leg down for shares.

But if you’re optimistic we are at or near the bottom for shares, which assets will do best in the recovery that follows?

Time for tech?

The overall market falls we’ve seen this year have been led by tech, particularly the giant US tech companies that make up a large share of that market. While the wider S&P 500 index has fallen around 17% in the year to date, falls among the big tech names have been much larger, with Amazon down 44%, Microsoft 26%, Meta (Facebook) 66% and Alphabet (Google) 32%. These prices are in US dollar…

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