While both the DOW and S&P 500 indices are trapped below the all time high that was establish in January 2018, the Nasdaq ignored all the noises and made three more all time highs since January 2018. We can’t ignore the fact the numbers are speaking loud and clear that the winners are still with tech!
A few major banks released earnings last Friday, but failed to ignite the banking stocks. The banking sector is in solid bear territory. The stock price performance is ranked 139th out of 197 industrial groups. The semi sector is in equally a bad shape. These two major sectors are needed in order to have a broad bull market. Maybe these two sectors will pick up later as the market clears out the noises, but right now the winners are with Nasdaq.
The Nasdaq outperformed every other indices with an impressive gain of about 13% for the year. The QQQ ETF had 10.61% YTD return. The QQQ’s main holdings are the high flying names such as the FANG stocks, essentially the Nasdaq 100 is the FANG stocks. Despite all the noises, Amazon and Netflix had no trouble at all making new highs after new highs.
It’s extremely difficult to find the fair value of Amazon or Netflix. These two companies don’t show any sizable net profit relative to their revenue, but the street has been sold by their vision and storytelling. Amazon and Netflix changed the rules of the game, no profits, not problem. It’s deja vu all over again like the dot com bubble era.
Better yet, we are at the eve of a new industrial revolution–artificial intelligence. So the bubble is only at the very beginning stage. For sure, we are going to have a tech bubble in the next few years surrounding the AI area. The multi-year easy money policy created bull market is not going to die off so easily, without a bull trap to destruct all the wealth accumulated before the bubble.
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