Tech stocks show why they're the new safe haven
As global stockmarkets tumbled this week, high-flying tech stocks such as Apple and Amazon gained again.
US technology giants are now behaving like a defensive investment, says John Authers on Bloomberg. While global stockmarkets tanked at the start of this week, high-flying companies such as Apple and Amazon gained again.
That goes to show that the tech pullback that rattled investors earlier this month was a sign of bullishness, not bearishness, says Authers. Growing confidence about economic reopening and hope that a vaccine will deliver us from the pandemic sparked a shift into sectors such as banks that are likely to benefit. This week’s second wave fears undid that, sending them fleeing back into tech. With an “entrenched competitive position” and “relative immunity” to pandemic disruption, technology has become the equity investor’s safe-haven of choice.
This year’s tech rally has drawn comparison with the heady years of the dotcom boom, when investors piled into risky startups, sending the Nasdaq up almost 90% in less than six months. That ended when the index crashed by more than half in the year 2000. But this is no repeat of the tech bubble, Andrew Garthwaite of Credit Suisse tells Market Watch. In a bubble, price/earnings ratios usually hit somewhere between 45 and 72, but the Nasdaq is currently on a comparatively moderate rating of 37. Defenders of today’s rally also like to point out that the likes of Apple and Google are wildly profitable, unlike many dotcom-era stocks.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Yet the 1990s brought genuine productivity gains, says The Economist. The internet and computers transformed business. By contrast, all the innovation of the 2010s has delivered us only “pitiful” productivity growth. There is talk of the pandemic bringing us all closer to an economy built on “electric vehicles and blockchain”. But for the time being it remains just that: talk.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex Rankine is Moneyweek's markets editor
-
US election: Trump is back - what does it mean for your money?
Trump is back, but what does his election victory mean for your money and which stocks are tipped to do well?
By Kalpana Fitzpatrick Published
-
M&S smashes profit expectations on the back of strong food sales
Marks & Spencer’s half-year profits rose 17.2% to £407.8 million, well ahead of the £359 million analysts were forecasting
By Chris Newlands Published
-
Invest in Hilton Foods: a tasty UK food supplier
Hilton Foods is a keenly priced opportunity in an unglamorous sector
By Dr Matthew Partridge Published
-
HSBC stocks jump – is its cost-cutting plan already paying off?
HSBC's reorganisation has left questions unanswered, but otherwise the banking sector is in robust health
By Dr Matthew Partridge Published
-
Lock in an 11% yield with Sabre
Tips Sabre, a best-in-class company is undervalued due to low profits in the motor insurance industry. Should you invest?
By Rupert Hargreaves Published
-
James Halstead is a family firm going cheap but should you buy?
James Halstead will rebound from a weak patch, while tax changes would be a buying opportunity
By Jamie Ward Published
-
Babcock: an overlooked defence investment
Defence stocks have outperformed this year, but Babcock has been left behind
By Oojal Dhanjal Published
-
Byju’s – the startling rise and fall
India’s educational technology start-up Byju's attracted big-name backers and soared to vertiginous heights during Covid. It has now plummeted. What happened?
By Jane Lewis Published
-
Shares in luxury goods companies take a hit – will they recover?
Luxury goods companies have run into trouble, and the odds of a rapid recovery have receded. What next?
By Dr Matthew Partridge Published
-
United Airlines set for growth – should you invest?
Airlines have rebounded well after Covid, but United Airlines can soar higher
By Dr Matthew Partridge Published