Tech stocks may be in the bear market; however, nothing to worry about. This is not a dot-com crash. This is the view of The Leuthold Group’s chief strategist, who argues for calm in his latest post. Jim Paulsen begins the case by saying that although tech business prices are close to 2000, Revenue is much more substantial today.
Earnings per share of the S&P 500 technology sector may have declined somewhat over the past two years. However, they remain about 60 percent higher than they were in the early 2000s. Tech promotions seem to be relatively cheap from a historical point of view.
Today, of course, several mega-sized companies dominate. According to the analyst, low-access technologies have never been incorporated into modern technologies. The relative price of the S&P 600 Small-Cap Technology Index has risen slightly below 1.0x in the current cycle; Than 1.7x during a period full of enthusiasm in the late 1990s
Jim Paulsen argues that technology is much more productive today; Will it be estimated relative sales per employee or relative return on investment. The data show how shares in the S&P 500 Technical Index have generated between 15 percent and 20 percent of ROE in recent years; Higher than the broad-based S&P 500. On a comparative basis, that compares the premium to 5 percent during the boom of the 1990s. Fundamentals> froth.
Comparing the market capitalization of the S&P 500 Technical Index with its economic weight, Or in proportion to nominal GDP coming from sales of the technology sector, Additional evidence provides that technological supplies, although cheap, may not be costly.
Great Tech Thunder
In March 2000, the market capitalization of the technology sector was 34%, compared to only 7.9% by weight of total economic activity. Dotcom’s tops included the stock market, in which the price of its leading sector disproportionately exceeded its economic contribution. Today, however, the market capitalization of the S&P 500 technology is only 27.2%, with an economic weight of 17.5%. Is the tech sector as cheap as it has ever been, given its contribution to the economy in general? No.
Is it grossly exorbitant or somewhere close to its relative value compared to the 2000 economy? No! A quick look at the multiple previous price gains of technical and non-technical stocks since 1990 underscores his point. Although the technology sector remains above the average relative rating of 32 years ago, This is nowhere near the total revaluation that existed in 1998-2004, When the sector P/E multiple peaks were more than 50 times.
Therefore, in today’s bear market of technical stocks, it is unlikely that Dotcom will be a reduction. Of course, technology can be frustrating, especially if growth and inflation are still hot and bond yields continue to rise. However, as for Paulsen, the risk of a complete technical “collapse” is probably past. Indeed, after a brutal April, the Nasdaq has risen in the last two days as investors returned.