The Tech Stock Rally Will Be Right Back
The Nasdaq Composite has fallen nearly 3% since June 8, as investors have purged their portfolios of once-beloved technology stocks. The reasons for tech’s sudden rout are elusive, but the outlook seems clear: After a timeout, the tech rally, the bull market’s reliable engine, will resume.
Those focused on the magnitude of losses in stocks such as Apple (ticker: AAPL), Microsoft (MSFT), and Alphabet (GOOGL), or the duration of the adjustment period, are missing the bigger picture. The Tech sector has delivered strong earnings growth for years and will continue to do so, as technology burrows into nearly every aspect of the economy, from consumer products to commercial and industrial applications. What’s more, many tech stocks are cheap.
Wall Street commentators offered reasons aplenty last week to bail on the sector: The stocks are too pricey, too popular, and too large a portion of the Nasdaq and other market measures. Yet few of their concerns, if any, were based on corporate fundamentals—which are sound. Tech-sector earnings are expected to rise by 12.4% this year and 11.3% in 2018, according to Thomson Reuters.
barrons.com
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