Bank of America’s top banker, Rick Sherand, sees a big shift in the market ahead.
Sherlund said the optimism surrounding tech stocks will return this year, but the key is to weather the next earnings season first.
“What we have to do is de-risk the 2023 numbers,” the company’s vice chairman of technology investment banking told CNBC’s “Fast Money” on Thursday. I think companies will show headcount cuts when they finish .We’ll talk about cuts in go-to-market spending…all of this is encouraging.”
Sherlund’s specialty is software. When he was an analyst, he was #1 on Institutional Investor’s All-Star Analyst list for the 17th consecutive time.
He is also known for leading the technology research team at Goldman Sachs during the dot-com bubble of 2000. Recent market conditions are reminiscent of previous recessions.
“2022 was a terrible year for them. [software] said Sherlund. The good news is that the recession will eventually be followed by an upturn. So in the near future there will be many backflows. ”
His latest market predictions are in line with technology-focused market predictions. Nasdaqrecent battle. On Thursday he fell 1.47% to 10,305.24 and is on the verge of losing for the fifth straight week.
Sherlund’s base case is that the move to high-growth areas such as the cloud will boost software stocks over the long term.
“People have to realize that this is an economically sensitive sector,” he said. “Some of the demand may have been front-loaded during the pandemic and when interest rates were zero.”
Sherlund argues that strong long-term tailwinds will eventually lift the group. And that should help us start consolidating in the form of mergers and acquisitions in the second half of this year.
“There’s a tendency to pick up the phone and talk about M&A. Up until now, there’s probably been little motivation,” Sherlund said. “There’s an awful lot of dry powder over there.”
He believes a stabilization in the Fed’s rate hike trajectory later this year will stimulate deal formation by supporting the challenging leveraged finance market.
“That way, we may be able to fund more M&A and LBOs. [leveraged buyouts]said Sherand.