With the recent poor performance of technology stocks, Wall Street powerhouse and U.S. institutional investor – Hall of Famer Rich Bernstein believes that the trouble for large technology companies may have just begun and that the downturn will continue for years to come, with the Nasdaq fearing a decline of well over 10%.
Bernstein was quoted in foreign media as blaming rising interest rates, saying that everyone seems to know that when long-term interest rates rise, they won’t buy long-term bonds, but what people forget is that it also makes people not want to buy long-term stocks, so what are long-term stocks? It’s those stocks with high price-to-earnings ratios. He also believes that the recent strength is temporary, and also compares the current backdrop to the dot-com bubble of the early 2000s, which now sees most of the hype stories in growth stocks.
He noted that most investors are currently unconvinced of the future downside and that most technology stock investors are not ready for a 3, 5 or 10 year situation of absolute negative returns. He suggests investors should target cyclical cyclical stocks that benefit from strong economic growth rather than large tech stocks, and he is particularly bullish on commodities and energy stocks.
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