The demand for software solutions is expected to keep rising due to extensive remote lifestyles and continued digitization. However, the possibility of aggressive interest rate hikes later this year to counter the surging inflation could lead to the software industry witnessing a downtrend. Investors’ losing interest in software stocks is evident from the iShares Expanded Tech-Software Sector ETF’s (IGV) 3.3% decline over the past month and 17.3% loss year-to-date.
According to St. Louis Federal Reserve Bank President James Bullard, interest rates could be hiked to 3.5% by the end of the year to curb the current record-high inflation. Therefore, overvalued software stocks might not be able to withstand such stringent monetary policy tightening.
