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.

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.

Recommended

Passive investors beware: you may be dangerously overexposed to big tech stocks
Stockmarkets

Passive investors beware: you may be dangerously overexposed to big tech stocks

Most investors in index funds are likely to be dangerously over-invested in US stocks, and particularly in a few huge tech stocks. It’s time to think …
15 Feb 2021
Stockmarkets shrug off turbulence
Stockmarkets

Stockmarkets shrug off turbulence

Stockmarkets have hit their first bout of turbulence of the year, but most are clinging onto January’s gains.
4 Feb 2021
The MoneyWeek Podcast: how to not lose money to inflation and financial repression
Investment strategy

The MoneyWeek Podcast: how to not lose money to inflation and financial repression

Merryn talks to Peter Spiller of the Capital Gearing Trust about how he navigated the last extraordinary year; what he's buying now; and how he plans …
16 Apr 2021
Lab-grown meat: the new agricultural revolution
Soft commodities

Lab-grown meat: the new agricultural revolution

Vegan alternatives are taking off, but the future of food technology lies in lab-grown meat – cultivating steaks and burgers from animal cells, says A…
16 Apr 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
What does the Coinbase listing mean for bitcoin and other cryptocurrencies?
Bitcoin

What does the Coinbase listing mean for bitcoin and other cryptocurrencies?

As the bitcoin price hit new highs, the world's biggest cryptocurrency exchange, Coinbase, listed on the stockmarket. John Stepek looks at what that m…
15 Apr 2021
Properties for sale for around £400,000
Houses for sale

Properties for sale for around £400,000

From a converted church in Banffshire with views towards the Cairngorms National Park, to a period property in the Georgian market town of Beverley, e…
2 Apr 2021