Jerome Powell's testimony could lay the groundwork for a sell-off in tech, says Deepwater's Munster

Investors are going to be watching for moves in the tech sector tomorrow and Wednesday when Fed chair Jay Powell goes before Congress to testify on monetary policy. Joining us right now for more on all of this is Gene Munster, the managing partner at Deepwater Asset Management. Gene, what do you think if Jay Powell starts talking tougher about inflation, maybe tougher than he did last time around, is that going to be a problem for the high growth tech stocks? Becky, I think undoubtedly it will be and I think that should be the positioning of tech investors going into Powell's testimony on Tuesday and Wednesday. The reason is I'm going to take what he said at the Washington think tank a few weeks ago as true when he said he does not get these economic data beforehand. Sometimes he gets a few hours heads up. The next key data point, of course, is Friday with the jobs number. For the next couple of days, or at least with his testimony, I suspect Chairman Powell is going to retreat to his fallback position of a more hawkish tone.

I think what he learned with the last Fed meeting is that if he is not overly hawkish, the market tends to interpret any fractional positive news related to any sort of breaks coming up in interest rates. So I suspect that he's going to be pretty hawkish and I suspect that that's going to lay the groundwork for a sell-off in tech. I'm a big believer in tech. I think this first half of the year is going to be a difficult year for tech and it's a very simple equation related to what we're seeing in the economy and specifically related to inflation. We'll hear that from Powell this week. Okay. So if that's what you're doing short-term, longer term, do you go back into those stocks and just get out of them in a trading sort of way ahead of that testimony? So I think there are two approaches.

We have two different products for each approach, but one approach is to time the market. I think if you have a market timing perspective, it's best to have overly weighted cash position right now. That fund, just over 50% in cash, I do not sleep well at night if the market fears of the market ripping, but that is our perspective at least for the next several months as we think that there's going to be some softness. And we're still invested though. Half we're still invested in companies that we think have margin upside. We do think that this sets up and I don't want to split hairs and have a mixed message here. I want to be very clear.

First half, I think that these stocks are going to be less performing relative to the overall market, but I think the back half of 23 and into 24 is going to be a great year for tech. I think that the numbers have come down now. We've seen more modest growth rates so that you just have easier comps, which sets up for I think a good investing period for tech. So near term, more cautious, but I still think if investors believe and want to be fully invested, there's still great companies to be invested in.

Squawk Box U.S., CNBC, business news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable, cable news, finance news, money, money tips, financial news, stock market news, stocks