This Tuesday and Wednesday were strange for the stock market.
Normally strong tech stocks fell, which left the tech-heavy Nasdaq index trending down.
Amazon.com Inc. (Nasdaq: AMZN), Microsoft Corp. (Nasdaq: MSFT), Nvidia Corp. (Nasdaq: NVDA) and Facebook Inc. (Nasdaq: FB) all lost more than 2% in those two days.
This was right after the Nasdaq reached record highs the previous two days.
The downtrend continued on Thursday, as the index was down around 0.7% in the afternoon.
News of California’s new business restrictions due to an increase in coronavirus cases spooked investors away from tech.
The biggest reason is because California is home to Silicon Valley … the epicenter of tech.
But it’s nothing more than headline reaction — a blip on the radar.
You shouldn’t be concerned. Tech stocks will lead the way through for several years.
Tech-Heavy Nasdaq 100 Continues to Climb
Well-known tech stocks dominate the Nasdaq, including:
- Apple Inc. (Nasdaq: AAPL)
- com Inc. (Nasdaq: AMZN)
- Alphabet Inc. (Nasdaq: GOOG)
- And Facebook Inc. (Nasdaq: FB)
The chart below shows just how the Nasdaq 100 has performed.
The Unprecedented Rise of the Nasdaq 100
As you can see, the index has jumped more than 900% since it hit a bottom during the Great Recession in 2009.
Money & Markets Chief Investment Strategist Adam O’Dell pointed out that, while the other major market indexes have fallen during the coronavirus crash, the Nasdaq 100 rose.
But he says we can still find strong tech stocks:
“We may be entering one of those short-term mean-reversion periods, where tech cools off some as the other sectors work to catch up and make their own highs. Ultimately though, you can find great momentum plays in the tech space.”
What’s more is that blue-chip tech stocks such as Microsoft Corp. (Nasdaq: MSFT), Apple and Amazon are still delivering double-digit returns in 2020, even in this recession.
In 2008, those companies’ returns were negative double digits.
It shows just how resilient tech stocks are, even when the economy is faltering.
Tech Stocks: What This Means for You
The bottom line is that this is just a blip for tech stocks.
Adam points out that tech domination is here to stay:
“The sector has been a relative-strength leader for a majority of the bull market that’s generally persisted since the 2009 bottom. And while we see some mean-reversion over short-term periods — meaning, when other sectors do better than technology, as they “catch up” and as tech “cools off,” a bit — I tend to see the trend of technology leadership continuing to last.”
Tech stocks will continue to climb. The technology sector is always changing and adapting. It’s in a unique position to catch fire again.
Remember: All stocks tend to go up and down over time — but in the long run, most of them rise in value.
And tech stocks have the resiliency to weather any of the four market cycles:
- Accumulation — When the market hits a perceived bottom and investors start to buy.
- Mark-Up — Where the market has been stable and is starting to move higher.
- Distribution — When the stock market goes from bullish to mixed sentiment.
- Mark-Down — When the market is trending lower, signaling a bottom is coming.
Ignore this blip and the headlines, and let our research be your guide.
Because tech stocks are still strong.