Having been one of a number of markets to post an all-time high in recent weeks, the Nasdaq fell 2% on Friday.
A few days later and it is yet to give us an indication as to whether or not it was just a warning shot of bubble territory and the start of a more prolonged decline, or whether it was simple profit taking and the index will once again revisit those highs.
After a post-Trump election fallout in the sector at the end of last year, tech stocks had been leading the way in the first half of 2017. And unlike in 2015, when the FANGs were the only show in town, this year returns have come from a much broader base.
According to AXA Framlington Global Technology fund manager, Jeremy Gleeson, tech returns this year have been justified, with companies’ results exceeding expectations – but the market gains have come too fast for comfort.
He believes Friday’s moves were a result of profit taking (and rumours that a large tech hedge fund was winding down and returning $8bn to unit holders).
Another factor in the sell-off was that Goldman Sachs had also put out a report suggesting that the valuations of the major tech shares weren’t accounting for their vulnerability to an economic slowdown.
However, given they were comparing the top-five tech stocks in 2000 with the top-five today, it wasn’t really comparing apples with Apple. It also looked at gross margins, rather than cash flows, for valuation multiples and profitability.
