Last week I wrote about why the stock market is hitting all time highs (ATH), beyond factors such as low interest rates and central bank intervention.
What's really interesting at the moment, is that owning anything but technology stocks means you're probably underperforming the stock market. Technology stocks, especially US technology stocks have been on an absolute tear since the COVID collapse. This stock market rally has been lead by the top 5 or 10 stocks - think Facebook, Apple, Amazon, Microsoft, Google (Alphabet) - these companies are now each worth US$1+ Trillion. In fact, these stocks are masking a lot of non-action from the other 490 or so stocks in the S&P 500, it's crazy.
The bursting of the technology bubble has been spoken about for some time. Ta-dah, it's here - well, not quite where you might think. It's unfolding in China, as the Hang Seng Technology index collapsed 37% since it's February highs, however rebounding 7.6% from it's July lows.
Interestingly, the Hang Seng and US Nasdaq have followed a similar path since the index was rebased back to 2015, however the US tech market hasn't flinched - continuing to mark yet another ATH. In fact, the top 5 technology names in the US have the equal weight of the bottom 350 companies, with Microsoft currently making up 5.42% of the S&P500 right now. This is higher than it's peak of 4.90% during the dotcom bubble. You want to know something worrisome, BHP and CBA make up over 17% of the ASX200. Let that sink in for a second.
The question on everyone's mind is whether or not this technology play will continue. My guess is it will. Will it continue to be the same names you see today? Probably not. These big status companies come and go, although it's really hard to see that when you're in the midst of it all. Think AT&T, IBM, Exxon, and General Electric. They've all had their time in the sun. Although, for IBM, their time in the sun lasted for over 20 years as the largest company in the US. The problem right now is that these companies are growing at such a fast pace that their competitors are being left in the dust, and they're just getting started.
Having said all of this, betting against this sector has been a losing hand for many years now. I know the time will come, I just don't know when. For now, enjoy the ride.