Party Like It's 1999
Everyone loves a party. The bigger the better. Right? The slight downside to these big parties are the big hangovers. We saw this playout in the GameStop saga. Here's the latest total return for GameStop for the last 12 months just in case you missed it - to the moon (and back).
This rise in price is absolutely insane. Technology was the top performing sector through 2020, and now, there is even more reason to wonder whether or not investors are partying like it's 1999 - all thanks to COVID, stimulus packages, social media, boredom, free brokerage, and a rebellious investor community.
In fact, the technology sector has notched up it's second straight 40%+ gain (2019 and 2020). The last time technology gained 40%+ two years in a row was in 1999, followed by three straight years of negative returns, 42.5%, 25.9%, and 37.4%.
Will stocks continue to be priced not by their intrinsic value, rather momentum and speculation? Maybe. Will we see a massive correction? In some names, of course. Could it be at all possible we see a correction in a broad range of stocks without it bringing down the entire market? Absolutely. Diversification is still your free lunch. Take it.