It looks like the markets have somewhat stabilized after the Federal Reserve commentary regarding tapering and interest rates. We are keeping it light for the last week and watching how high growth tech stocks perform before we go into the new year, especially with the Omicron variant. Many stocks are down 20-40% from highs, and the new year could setup some good buys for us.
It is no surprise that the markets are displaying volatility. Inflation is the worst it has been in years, the federal research has announced that it will start to raise interest rates next year, a new covid variant has caused stocks to sell off once again.
While the Nasdaq Composite is still within 10% of all-time highs, the broader tech market is really telling us a different story. According to a recent article in Forbes, If you take the Nasdaq Composite and exclude the Nasdaq 100 companies, the unweighted average distance from the 52-week high on December 17th was 43%. That is a big drop when you look at it compared to the broader index.
A big part of this is because companies like Apple, Microsoft, Google, and other mega-caps have an outsized weighting on the index and have held up quite well as they become a flight to safety.
What this means is that some great tech stocks have been pulled down with the broader market and thrown out with the bath water and that’s exactly what I want to look at today.