Investors Get Wary on Tech Stocks

Outflows Jump in Technology Funds

Outflows from PowerShares QQQ Trust Series 1, which tracks the NASDAQ 100 Index, topped $3.7 billion for the five sessions ending 28 July, the most since early November 2007.

Such moves in volume can signify coming volatility as investors shuffle positions in and out of sectors.

Why did it do this?

Despite a generally impressive round of earnings results for such tech heavyweights as, investors are perhaps starting to get nervous around the high valuations.

The NASDAQ has outperformed the S&P 500 index by 10% already so far in 2017, and many investors will use the earnings season as cover to start taking some profits off the table and reducing portfolio risks.

What now for the NASDAQ?

While clearly still in an eight-year uptrend, tangible fundamental results are likely to be needed going forward to continue the march higher.

In the short term, that might mean a correction rather than a crash. Or the index may just continue to ever greater heights.

Picking market tops is not easy…

But should we see any sustained pick-up in volatility, the stretched valuations in this sector are likely to see it hit the hardest. And that’s the primary reason for investor wariness right now.

Ryan Dinse,
Analyst, Money Morning

PS: There is one tech sector that is no stranger to volatility. But it sits apart from everything else, and marches to its own beat. Bitcoin is leading the charge to reinvent the world of banking and finance. And it could potentially act as a hedge against future market volatility. Interested? Find out more here.

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

Ryan's premium publications include:

Money Morning Australia