Last week, tech stocks were taken to the woodshed. Have they recovered?
For that, I must bring you back to March 2000 when the Clinton anti-trust division was in the penalty phase after initial findings proclaimed Microsoft was a monopoly in a lawsuit that was brought by the competition. That was the kind of news the government leaks on a Friday night or Saturday morning when many people are not paying attention. But people were paying attention and the following Monday the Internet bubble popped. Sentiment turned as word was leaked by an adverse finding in the United States v. Microsoft case which was in federal court at the time. Don’t you think if Trump went after Amazon, Google or Facebook sentiment might rollover and the market could tank? If you think Trump is in trouble now, wait until a nasty bear phase hits and the crowd really gets angry.
This is the flip side of tying your success to a stock market rally as politicians like to do. The problem is gravity. What goes up invariably must come down and we sit with a rate increase environment after 8 straight years of not averaging 3% GDP for a single year.
Next up for financial markets is the seasonal change point with the beginning of summer. Markets don’t go straight up or down and tend to turn with the season. This is also the week the British start serious Brexit negotiation. Summing all this up, the market will do its best to sustain the rally but, is all over the map. It looks like the kind of transition we get when the bull gets long in the tooth but not ready to begin a bear phase. In the past week I’ve seen a slow but steady deterioration in a lot of areas.