Self Managed Super Funds (SMSF)

Should investors be wary of the tech sector?

By AMP Capital

Technology stocks may have felt like a precarious place to be invested in recent months, but we’re hardly in the midst of a tech crash a-la the early 2000s, says Shane Oliver, AMP Capital’s Chief Economist.

Technology stocks, particularly in the United States, where the so called “FAANG” group of stocks - Facebook, Amazon, Apple, Netflix and Google – are listed have been leading the recent share market corrections which has led to broader share market falls, Oliver says.

Tech stocks listed on the NASDAQ fell the hardest during the February share market correction, which spread into broader falls of share market indices globally, Oliver notes.

While tech stocks do hold some additional risks for investors because of their popularity in recent years among growth-seeking investors, these risks are not comparable to risks during the dot-com bubble in late 1999 and early 2000.

Oliver compares valuations of technology stocks today with valuations back in early 2000 in this article published late last year.

In his latest commentary, Oliver highlights that tech stocks received a boost during the period of quantitative easing and are now face some potential headwinds.

“These stocks were a big beneficiary of QE. Investors wanted to invest in the share market, but they also wanted good growth prospects, and the FAANG stocks met that criteria,” Oliver says.

Oliver highlights some recent political and regulatory concerns which have impacted the share price of individual companies within this group as well; Tweets by US President Donald Trump relating to ecommerce platform Amazon and the recent data scandal enveloping Facebook have heightened investors’ concerns in the segment.

Despite all this Oliver says points to valuations in this segment which are in line with the broader share market making it unlikely for there to be a repeat of the 2000 tech crash.

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Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

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