Scottish Mortgage Investment Trust (SMT) share price forecast

The Scottish Mortgage Investment Trust (LON: SMT) share price has been in a deep sell-off in this year as concerns about growth continues. The stock is trading at 705p, which is about 54% below its highest level in 2021.

Is SMT a buy?

Scottish Mortgage Investment is one of the oldest investment funds in the UK. It was established in 1909 to provide investors with a simple way of investing in the mortgage industry.

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The fund, which is the flagship for Baillie Gifford, has changed over the years. It is no longer a Scottish fund and it does not offer mortgage services.

Instead, it has become a growth fund that invests mostly in technology companies. Most companies in its portfolio are from the United States.

A look at its documents shows that its biggest holdings are companies like Moderna, ASML, Tesla, Illumina, Tencent, Meituan, Amazon, and NVIDIA.

Therefore, the Scottish Mortgage share price has plummeted because of the ongoing sell-off in tech stocks. The Nasdaq 100 index has fallen by more than 30% in 2022 while other growth-focused funds like Cathie Wood’s Ark Innovation Fund has plummeted by 75% from its highest level in 2021.

Investors are simply worried about a potential recession in the coming months as the Federal Reserve continues tightening its policy. According to the WSJ, the probability of a recession in the next 12 months has risen to 44%, the highest level since 2020.

Scottish is also struggling because of its exposure to Moderna. While the company’s vaccine did well, its performance has been dismal as demand for Covid-19 vaccines wane. 

At the same time, the fund has an exposure to Chinese growth companies like Meituan, Nio, and Pinduoduo. Most importantly, Scottish Mortgage has an exposure to private companies that have been decimated. Some of those it has invested in are Blockchain.com, Away, Convoy, and Capsule.

Now, with the Fed tightening, there is a likelihood that the fund will continue struggling in the coming months.

Scottish Mortgage Investment Trust share price forecast

The daily chart shows that the SMT share price has been in a strong bearish trend in the past few months. The stock has moved below the important resistance level at 816.6p, which was the lowest level on 9th March.

SMT has moved below the 25-day and 50-day moving averages while the MACD has moved below the neutral level. Therefore, the stock will likely continue falling in the coming weeks.

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