How could investors not like technology stocks? They’re cool companies, led by charismatic CEOs making irresistible products. And what's more, they're posting amazing growth rates with stocks that just keep going up. I’m sure the bottom-up investment case is much more sophisticated than that, but today I want to lay out the strong macro case for tech stocks.
In at least one respect, I can identify with Millennials: FOMO. The ‘fear of missing out’ on things such as Game of Thrones, tickets to FC Cologne vs Arsenal, that perfect powder run on my snowboard holiday or front row seats at my daughters’ nativity plays. But looking at markets at the moment, it’s pretty obvious I’m not the only one with FOMO!
How much of where equities are today has come from quantitative easing (QE)? For a long time the answer to this question has not really been that important to equity investors. But now, with central banks moving towards shrinking their balance sheets, it’s a question equity investors can no longer ignore. My view is that QE may not have contributed much to the equity rally and therefore its unwinding may not be a major concern either.
After eight bull market years and with strong macro data all round, recession and bear market memories must surely be fading. Still, signs of exuberance or great bullishness are difficult to find; at most there is cautious optimism. Why? One of the most common push-backs against an equity bull case is that equities are too expensive. I can see where this concern comes from, but believe it’s something to push back against. Here are my top 10 points on equity valuations.
Markets are grinding higher and many investors are looking to call the top of the market cycle. In this light we ask ourselves what causes bubbles and more importantly how do we spot them? Over time I have collected a range of indicators that seek to have some predictive value in spotting bubbles emerging. I modestly call this the Heiligenberg Index.