Investors have incredible recovery from the “Tahrir Day” tariff surprises on April 2. Since April 8, Nasdak(Nasdaqindex: ^IXIC) It has estimated 40 % incredible. Of course, this recovery occurred in a decade of time Taurus Market In technology growth shares.
It is easy to understand the cause. Society has become more digital and automated. The past ten years have witnessed the emergence of cloud computing, flowing video, digital advertisement, and a flood of epidemic in electronic devices and work from home, all of which are led by the introduction from Obstetric artificial intelligence (AI) It was distinguished by the disclosure of Chatgpt in late 2022.
However, after a long bull market for technology, technology growth shares have reached a disturbing level of evaluation for other stocks, and the relative value mirrors today in the history of the stock market.
In several ways, the performance and assessments of technological stocks currently reflect the utmost mutation in the late 1990s. Unfortunately, we all know how this period ended, with a terrible “bust” statue that Nasdak sent a three -year consecutive, and eventually reached its peak at a decrease of 78 % from March 10 2000.
Technological innovation can be very exciting; However, this excitement often finds itself in the form of high assessments. According to the data published on the Charlie Bilello’s State of the Markets Blog, the last superior performance of the technology sector has exceeded after the rise of the Dot-Com bubble:
A graph showing the performance of the technology sector for the S&P 500 since 1990.
The proportional superior performance is not the only mirror of the Dot-Com. At that time, technology shares became very large, which led to the superiority of large stocks for small stocks. Likewise, technology shares are often high complications, which reflects enthusiasm on its future horizons. This is unlike valuable stocks, which are traded with low complications, usually due to the most modest growth prospects.
As you can see below, the superior performance on large stocks to small stocks, as well as arrows growth to stocks, is in the highlands that were last seen during the Dot-Com breakthrough.
Given that higher value -value technology shares are now greater part of the indicator, the SCLLER rate (P/E), which adapts to patrol in profits for 10 years, while not reaching levels in 1999, almost to the highest level since 1999, approximately from 2021:
As we all know, the year 2022 was a terrible year for technology shares. Although he had not seen a multi-year accident closer to the Dot-Com bust, 2022 witnessed a 33.1 % decrease in Nasdak on this year. Of course, at the end of 2022, Chattabt came out, as it rescued the technology sector with the start of the artificial intelligence revolution.
Thus, when compared to history, technology shares are at alarming levels. Looking at the similarities with the 1999 Dot-Com bubble and the epidemic of the epidemic 2021, some may think that time has come to panic and sell; However, there are also a few adults opposed to consideration.
The first is that, unlike 1999, the technology giants today are often truly varied, and they represent a larger and larger percentage of GDP today (GDP). While the late 1990s they definitely had its leaders – including Microsoft(Nasdaq: msft)The only market leading market that is in the same position today as is the case at the time – nothing was actually anything like technology giants today, with strong cloud companies, the global scale, various income flows, and huge amounts of money.
While the market concentration in the first three weights tends to happen before the extinction of the market, it seems that the concentration of the weighting of the index is somewhat long -term direction now, and it exceeds the previous highlands in 1999 and 2008 since 2019.
Photo source: Charlie Bilello State of the Markets.
Consequently, it appears that the high weighting of the “wonderful” shares of the “wonderful” can be a feature of today’s economy, rather than deviation.
Although it is correct that some large companies today are exaggerated, given their strength and inherent flexibility, this may not be unnatural for them to gain the complications of the supreme evaluation of the abnormal.
It is important to know that although taking into account market levels is important, it is very difficult to slow down in the market. “I have lost much more money by investors who are preparing for corrections, or an attempt to expect corrections, which was lost in corrections themselves,” said famous investor Peter Lynch.
Therefore, one should not give up the long -term investment plan just because the total market levels may be a joke. However, if you need a certain amount of money the following year to two years, it may be good to keep these funds in cash or treasury bills until then, instead of the stock market.
Moreover, if you have a regular and systematic investment plan, you can stick to it. But if you constantly add to your wallet every month or a quarter, you may want to look at small hats, non -technical sectors and stocks today, instead of adding large technology companies.
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Billy Durachtein He has positions in Microsoft. Motley Fool has positions in Microsoft and recommends it. Motley Fool recommends the following options: Long January $ 2026 $ 395 on Microsoft and Short January 2026 $ 405 calls on Microsoft. Motley deception has Disclosure.
