What the Tech Bubble in 2000 May Tell Us About the Stock Market Today

There’s logic to judge history is repeating itself, according to a caller Deutsche Bank statement that draws parallels betwixt nan existent rotation retired of tech mega-caps and nan bursting of nan tech bubble successful 2000.

In nan 9 months aft nan bubble reached its highest successful March 2000, tech stocks fell much than 50%. The Consumer Staples, Utilities, and Healthcare sectors, meanwhile, each roseate by much than 35%.

Research expert Jim Reid sees similarities betwixt that infinitesimal and nan current assemblage rotation retired of large tech stocks. The Magnificent Seven shed astir 12% of their worth betwixt July 10 and Thursday, though they’re recovering immoderate of those losses successful today’s session. The S&P 500 mislaid astir 4% successful nan aforesaid period. However, 7 of 10 sectors wrong nan scale roseate complete nan period, led by utilities and healthcare, overmuch for illustration successful 2000. 

“The conclusion is that if tech continues to correct, we should spot decent up moves successful different sectors, particularly arsenic nan size of tech dwarfs different sectors,” wrote Reid. “So moreover a mini rotation retired of tech could mean a large rotation into different sectors.”

Uncertainty a Near-Term Overhang connected Tech

The caller pullback successful high-flying tech stocks people prompts nan question: should you bargain nan dip? The reply depends connected your timeline.

"Our position is tech astir apt remains choppy here, astatine slightest done nan election," says CFRA tech expert Angelo Zino. Given nan uncertainties generated by nan impending predetermination and expectations for complaint cuts later this year, he added, "We would opportunity [tech] stays much range-bound and retired of favour connected a comparative basis."

Here nan dotcom bubble offers different lesson. Tech and telecommunications stocks continued to autumn aft 2000, and mislaid astir 85% and 75% of their value, respectively, by nan extremity of nan post-bubble carnivore marketplace successful precocious 2002. An finance successful nan tech-heavy Nasdaq Composite astatine nan commencement of 2001 would person trailed nan S&P 500 until 2009. But tech has handily outperformed since then, and that Nasdaq finance would now beryllium much than 200 percent points up of nan aforesaid finance successful nan S&P 500.

Zino sees imaginable for nan existent assemblage rotation to continue. But, he says, "If you're a agelong word investor, this pullback we deliberation is really a beautiful bully opportunity."