Tech shares might have been the play for 2023, however for subsequent 12 months Financial institution of America Securities likes their debt. The financial institution known as investment-grade company bonds of expertise firms one in all its prime 10 trades for 2024. “Own tech balance sheets, but not tech EPS in ’24,” funding strategist Michael Hartnett wrote in a Nov. 19 observe. The “Magnificent 7” tech shares — Apple , Alphabet , Amazon , Microsoft , Meta Platforms , Nvidia and Tesla — led the market greater this 12 months. Nvidia, for example, has skyrocketed a staggering 229% 12 months so far, whereas Meta is up 190% to this point this 12 months. The tech-heavy Nasdaq has gained 39% 12 months so far. Hartnett mentioned his name on the bonds of massive U.S. tech firms is a “great, underappreciated contrarian hedge” in a 12 months that may probably see fee cuts from the Federal Reserve and both a “hard landing” or “soft landing” for the financial system. “How do you position for unexpected events next year? A decent hedge would be the bonds of companies that have a lot of cash,” he added. “The Magnificent 7 have a lot of cash.” That surprising occasion could be a tough touchdown, based on Harnett. He says the consensus view is a comfortable touchdown, or a gradual easing of inflation and the labor market in response to the Fed’s fee hikes. However Harnett expects there’s a larger threat than anticipated that the financial system will decelerate abruptly. If a tough touchdown is underpriced by buyers, then this consequence unquestionably will likely be adverse for equities, Harnett defined. With the largest positions in equities within the Magnificent 7, a tough touchdown would result in deleveraging of these shares, he added. It could even be constructive for bonds. “You would get some rotation into high quality corporate bonds — and there is nothing more high quality in the corporate bond market than large-cap U.S. tech,” Hartnett mentioned. Total, he expects cash to circulation into bonds subsequent 12 months. Shopping for investment-grade tech company bonds is only one facet of the agency’s barbell technique within the asset class, he mentioned. “You certainly want exposure to what we would call the diamonds in the rough — the best house in the worst neighborhood, like banks,” Hartnett mentioned. — CNBC’s Michael Bloom contributed reporting.