This year’s 20% rally in U.S. technology stocks is decoupling from reality ahead of what’s predicted to be a gloomy reporting season, the latest MLIV Pulse survey shows.

While investors have flocked to tech in the market shake-up amid recent banking turmoil, the rotation is at odds with analyst calls for the steepest drop in quarterly profits for the sector since at least 2006. Nearly 60% of the 367 respondents surveyed by Bloomberg said the bounce in the shares had nothing to do with earnings expectations.

Profits at big banks, on the other hand, are likely to have taken a hit from the tumult in the industry, according to 41% of the participants.

“The tech outperformance is a bit overdone and we’re not chasing that indiscriminately,” Wei Li, global chief investment strategist at BlackRock, said in an interview in London. “It’s being driven by expectations the Federal Reserve will start cutting rates as a recession becomes evident, and not necessarily by company fundamentals.”

The fallout from Silicon Valley Bank’s collapse has spurred mixed narratives as to where policy and markets are headed. While worries of a recession are mounting, they’re also stoking optimism that the Fed will be forced to pause its rate-hike campaign, even as the central bank grapples with sticky inflation. U.S. payrolls rose at a firm pace last month with the unemployment rate dropping again near record lows, paving the way for the Fed to increase interest rates at its next meeting.

The reporting season is the next big catalyst for investors who’ve been glued to economic data and Fedspeak for market cues. The earnings will drag the S&P 500 lower, said 60% of survey respondents, while data compiled by Bloomberg Intelligence shows analysts estimate a profit drop of 8% for its members in the first quarter.

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“More broadly, the impact of inflation and higher costs still has room to hit profit margins, and that will come through this season,” said BlackRock’s Li.

Such a strong survey consensus raises the bar for disappointment. While the read-across to positioning indicators may be a stretch, work on noncommercial CFTC data shows that taking a contrarian view is generally profitable.

The report card for tech will be crucial for the overall market since the S&P 500’s 7% gain in the first quarter has been mostly powered by a handful of sector giants. Analysts estimate U.S. tech earnings plunged 15% in the three months through March, with companies hit by high costs and slowing demand.

Early omens don’t bode well, with broad layoffs in the industry signaling a slowdown. Tesla shares, which trade more like a growth or tech stock, slid this month after the electric-car maker’s slim gains in vehicle deliveries in the last quarter, disappointed investors.

About a fifth of S&P 500 companies have issued guidance on first-quarter results in recent weeks, with three negative forecasts for every positive one, according to Aneeka Gupta, a director at Wisdomtree.

Tech stocks are also looking expensive. The Nasdaq 100 is trading at 24 times its forward earnings, well above its long-term average of 19 and the S&P 500’s multiple of 18, according to data compiled by Bloomberg.

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More than a quarter of the respondents to Bloomberg’s survey expect earnings to stall the tech rally. Only 14% predict further gains.

Where tech has gained favor, banks have lost it. A key focus for investors in the earnings season will be any impact of the recent collapse of some regional U.S. lenders.

About 41% of those polled by MLIV Pulse expect the turmoil to hit profitability at the bigger banks, while 31% don’t see a spillover.

JPMorgan Chase and Citigroup will provide a first look when they report results on April 14. Analysts still project a profit increase of 4.2% for U.S. financials in the first quarter, data compiled by Bloomberg Intelligence show.

“Given what we know now, and the fact that recent banking issues were caused by liquidity problems – not credit problems – we do not expect a broader fallout affecting larger banks,” said Ron Saba, senior portfolio manager at Horizon.

The biggest negative factor this season will be a further tightening in financial conditions, according to a third of those polled by MLIV Pulse. An economic slowdown and high inflation are seen as the next biggest risks.

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While some recent data show an easing in price pressures, market strategists including Morgan Stanley’s Michael Wilson have warned that profit margin expectations are still too high.

Overall, about 56% of participants expect U.S. Treasurys to outperform equities over the next month.

“The upcoming earnings season has the potential to send shivers among investors as high prices, an increasingly likely recession and difficulty accessing capital amid the banking sector debacle will all weigh heavily on the market,” said Greg Bassuk, chief executive at AXS.

Of the respondents in the latest survey, 65% were professional investors, and 35% were retail.

Bloomberg’s Alicia Diaz, Sungwoo Park, and Simon Flint contributed to this report.

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