After the worst year, the technology sector showed a strong comeback at the start of 2023. Hopes that the Fed will soon wrap up its inflation-fighting campaign have bolstered the risk appetite. Optimism over cooling inflation has compelled investors to buy beaten-up technology stocks.

The technology-heavy Nasdaq Composite Index rallied 2.6% in the initial days of the year, outperforming the other major indices. The S&P 500 and the Dow Jones Industrial Average gained 2% and 1.7%, respectively. As such, tech ETFs have been leading higher, with Valkyrie Bitcoin Miners ETF WGMI stealing the show with a 40.5% rise. This is followed by gains of 33.4% for VanEck Digital Assets Mining ETF DAM, 30.1% for Global X Blockchain ETF BKCH, 29.1% for VanEck Vectors Digital Transformation ETF DAPP and 28% for Bitwise Crypto Industry Innovators ETF BITQ.

Inflation has been easing and consumer confidence is rising. The latest job data showed a deceleration in wage growth, which gave investors hope that the Fed could ease off on its interest-rate increases, resulting in a boost to the tech shares.

Markets are expecting that the Fed could soon signal an end to its rate hiking cycle. A moderation in wage increases and a decline in U.S. services activity in December signal a slowdown in the U.S. economy and buoyed hopes of a less hawkish stance from the Fed. Per the latest data, traders are betting on a 25-bps rate hike at the central bank’s upcoming policy meeting in February, with the rate seen…