![]() ![]() Is that what has occurred this time around? Mmm, yes and no. It often takes a catalyst like rising rates or corporate bankruptcies to trigger the bust. The bubble bursts when the market runs out of buyers as reality catches up and the euphoria disappears. In short, a bubble occurs when stock prices rise until valuations become divorced from economic reality. Were tech stocks in a bubble at the end of last year?ĭepends on who you ask, but most say yes. Now, the numbers aren’t quite as big, but then again, the index heavyweights of today are more mature and profitable companies compared to the heavyweights back then. In the five years to November 2021 the same index appreciated by 205%, and it’s since fallen as much as 35%.In the five years to March 2000, the Nasdaq Composite index rose 489%, and then it fell 75% over an 18 month period.The performance of tech stocks over the last few years draws obvious parallels with the Dotcom bubble and bust 22 years ago. There’s plenty to unpack here, so let’s dive in. Many tech stocks, big and small, have been hammered over the last year, and investors are wondering if this is a repeat of the Dotcom bust of the early 2000’s.While plenty has happened over this last week, we’re going to dive into just one topic: Sector 7D Performance - 2nd November 2022 - Simply Wall St Meanwhile energy, industrials and financials faired better since the latest jobs data suggested the economy was still strong. With that kind of inconclusive commentary, investors opted to take some money off the table in rate sensitive industries like the tech, communications and consumer discretionary sectors. The latest commentary gave hints that the pace of hikes could slow, however there were also indications that the inflationary data was still ‘hot’. You may recall the importance of the Fed’s commentary from our prior piece covering how they choose their wording wisely. While the rate increase came as no surprise, the accompanying commentary gave the market mixed messages, which definitely contributed to the volatility. Add to that the heavy selling in some big name tech stocks, and you might be feeling even more Deja Vu, but of the Dotcom bust variety. You’d be forgiven for feeling a bit of Deja Vu this past week since the Fed raised rates again by 0.75% for the 4th consecutive time this year. ![]()
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