A top Wall Street strategist pinpoints the reasons why tech is going to become a stock market underdog

• Tobias Levkovich, Citigroup's chief US equity strategist, is among several strategists on Wall Street sounding a cautious tone on technology stocks.
• Last year, big tech gave the stock market its largest gains.

The chorus of strategists calling for caution on tech stocks keeps getting louder.

Tobias Levkovich, Citigroup's chief US equity strategist, is among those who say the sector is unlikely to repeat its role in 2017 as the stock market's leader. Strategists at Bank of America Merrill Lynch, Goldman Sachs, and Morgan Stanley have also sounded a cautious tone on big tech.

"We're not telling you these stocks are going to crater," Citi's Levkovich told Business Insider in a recent interview. "We are saying they could underperform, which is a very different story."

Some of the big tech news of the year that has added to investors' caution has come from the so-called FAANGs that propelled the market last year; the Nasdaq 100 surged 21% last year. As Facebook continued to deal with election interference, the harvesting of its users' data by a quiz app and Cambridge Analytica was blown into the public's view. President Donald Trump went after Amazon for crushing smaller retailers. Analysts were worried about sluggish iPhone X demand.

Coupled with Levkovich's list of reasons why tech could underperform is a slew of longer-term trends, or what he called "demand functions," that are driving the sector: mobility, the cloud, cybersecurity, automation, virtualization, and artificial intelligence.

However, an investor who's counting on tech stocks to beat the market would be disappointed, if his call turns out to be prescient.

"You need new buyers to come in and you need to give them catalysts to buy," Levkovich said. "Right now, I can give you a couple of reasons why they might not want to buy."

Here are six of his reasons why:

1. Higher bond yields mean the present value of future earnings or cash-flow streams are hurt. Secular growers tend to have an issue when you have higher bond yields.
2. If the economy is somewhat better - and that's why bond yields are going higher - then investors have other options to get growth at lower prices. They can buy cyclical alternatives to tech that can grow rapidly at a lower PE.
3. There are concerns about more regulation, which would bring higher costs.
4. The European Union is considering new taxes for large tech companies.
5. Projected earnings-growth rates indicate a slowdown in the second half of the year for tech - an industry that tends to be driven by growth and momentum.
6. Many stocks, in the software and services industry for example, are not undervalued, and Citi's valuation metrics that have been the most predictive of stock price performance are suggesting these stocks can underperform.

"But what about strong earnings?" is a reasonable retort to Levkovich's view.

However, even beyond tech, he's not counting on first-quarter results to be the medicine that heals the market after a volatile start to 2018.

Heading into 2018, Citi's view on equities was that it would be a year of consolidation, among other things, after the prospects of tax reform and fiscal stimulus jolted the market in 2017, sending several measures of equity valuations including the price-to-earnings multiple to brow-raising levels, .

"The move in the market in 2016 and half the move in 2017 was multiple-related, kind of anticipating a more pro-business, pro-growth agenda," Levkovich said. "And as you got it, you were earning your way into it - you already paid for it, and you're not going to get paid a second time."

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