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The Nasdaq Composite Index has fallen more than 5% so far in September.
dream time
Although technology hasn’t given us the flying cars or cloned dinosaurs we thought we might find in the 21st century, it has nevertheless advanced by leaps and bounds in recent decades. According to Datatrek Research, this should provide some relief to investors who have lamented the recent market roughness.
This year’s stock market rally has stumbled through a historically difficult August and, so far, September.of
Dow Jones Industrial Average,
S&P500,
And that
Nasdaq Composite
All stocks are in the red this month, and no stock has hit a new 52-week high since the Dow Jones Industrial Average on August 1st.
The main culprit is the sharp rise in interest rates that began in 2022 after years of ultra-low levels. Interest rates are likely to remain high, and some investors are concerned that interest rates may continue to weigh on stock prices. However, DataTrek Research co-founder Nicholas said,
Cola
Reminds investors to look beyond interest rates and Federal Reserve policy.
“Tech stock valuations can move up and down with interest rates, but innovation doesn’t care about the yield curve,” Collas wrote on Tuesday. “As markets struggle to adjust to rising interest rates in 2023, it is useful to remember that it is disruptive innovation that drives long-term returns in the stock market, not the yield curve.”
The tech-heavy Nasdaq suffered the biggest decline of the three major indexes in September.However, Colas says that in the 1970s (when interest rates rose again and inflation occurred), the HP-35 calculator and
apple
II personal computers, even though ultra-safe U.S. Treasuries boasted even higher yields than they do today. From its founding in 1971 to the end of its decade, the Nasdaq not only rose nearly 50%, it outperformed the S&P 500.
In terms of long-term market returns, 10-year yields have no effect on the yield on 10-year Treasuries due to Moore’s Law, which states that the computing power per dollar doubles every few years. says Colas.
Putting it together like this: Apple (AAPL), Amazon.com (AMZN), Google parent company Alphabet (GOOGL), Facebook parent company Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), Tesla. (TSLA) has skyrocketed. Enthusiasm about the transformative power of artificial intelligence and machine learning across industries is driving investor interest.
In other words, we’ve come a long way since the 1970s from pocket calculators, but a few decades from now, our current technology will look archaic. Investor concerns about the recent stock market downturn may seem trivial in a few years.
“While interest rates and other macro considerations are certainly important, human innovation is more powerful in driving long-term stock returns,” Colas concludes. “And thankfully, entrepreneurs and technologists don’t care too much about where a 10-year Treasury note trades as they build their next novel and disruptive business.”
And he’s not alone in arguing that the rally for Big Tech isn’t over yet, as technical patterns such as upward earnings revisions are bullish signals for the industry.
“[T]”Environmental damage across industries is creating opportunities for investors to increase the long-term growth potential of their portfolios,” Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, wrote in a note on Tuesday. ing. She said: “In technology, the impact of artificial intelligence extends beyond enablers and platforms to software and solution providers, so we focus on disruptors in the software, internet and infrastructure sectors.”
Technology’s ability to continue to transform our lives and boost stock market profits has almost made up for the lack of flying cars and non-extinct dinosaurs. largely.
Email Teresa Rivas at teresa.rivas@barrons.com.
