Are Big Tech Stocks Irrational?
It’s no joke – we are in the nosebleed section with tech stocks here.
But that doesn’t mean there is no more room to run.
Euphoria can continue until it doesn’t, and that’s where we are right now in the Nasdaq as we close in on 14,000 points.
If we take a minute to understand the different opinions out there, overall, people think tech isn’t cheap right now and rightly so.
Out of all assets, bitcoin and U.S. tech stocks are considered in bubble territory right now.
A survey contributed by market professionals in late January found that 89% of professionals believe we are in a bubble.
In the bubble, bitcoin is the posterchild of bubble activity.
The next so-called bubble poster child is big cap U.S. tech stocks.
Hard not to say no when the likes of fintech giants PayPal (PYPL) are up 25% YTD.
Another name that has seen insatiable appreciation in underlying shares is electric vehicle (EV) maker Tesla (TSLA) peaking at $880 and consolidating back to $790 today.
Tesla, meanwhile, also saw a massive climb in its share price in 2020 and that has extended into the new year.
CEO Elon Musk was crowned the world’s richest person.
The stock is up more than 700% year over year.
It is not exactly certain what might take down these robust names.
The number of tailwinds is still plentiful.
Loose monetary situations supportive of bubbles will stick around with the public health situation lingering for longer than first anticipated.
The health dilemma is highly likely to spill over into 2022 at this point.
More investors say the rollout of vaccines deployment is failing (41%) than those who said it’s been better than expected (22%).
Only half of those surveyed see normality returning by December.
Then checking in with the latest from a big American investment bank validated these survey numbers with massive in-flow of equity capital.
Brokers have been busy and rightly so as equities have been frontpage news lately with speculative mania reaching fever pitch.
A record net 25% of investors surveyed by the American investment bank this month are taking higher-than-normal risks.
Cash levels slumped to the lowest since 2013, while optimism on cyclical risk assets rose to the highest since 2011.
The yields out there have never been lower and bearing more risk is required to produce the same number of gains.
Unrivaled optimism has been percolating with 84% of fund managers expecting global corporate profits to improve over the next 12 months.
For the first time in a year, investors say companies should focus on spending rather than improving their balance sheets.
We are in the midst of going from balance sheet protection to really letting it loose with capital spending and the synergies that surround it.
Easy money and upcoming health solutions are fueling tech investors into reflation trades of all stripes but mostly trading that is hypertargeting towards the best of tech.
Even if a mini correction presented itself, the mentality of “buy the dip” has strengthened since last March and it will really take a mega black swan event to topple this momentum.
In short, the tech narrative is strengthening with not only the gold standard of tech monopolizing even more revenue, but the second tier is gaining ground in terms of percentage appreciation as well.
The secular trends that buttress tech have also fortified over the pandemic and no government, big or small, has proven a match for proper regulating big tech.
