Chart shows why tech stocks could stage an epic comeback
It’s finally time for tech stocks to organize a big comeback.
We’ve all been waiting for this moment. Ever since tech stocks started crashing in late 2021, we knew they would bottom out eventually. And we knew when they did, it would create the buying opportunity of the century…
Like when tech stocks bottomed out after the COVID crash and soared over 130% in less than two years.
Like when tech stocks bottomed out after the 2008 financial crisis and soared 120% over the next two years.
Or like when tech stocks bottomed out after the dot.com bubble and soared around 100% over the next year.
We’ve all been waiting This moment; the bottom – then the rise.
And we think it has finally arrived.
Tech stocks regain their mojo
You may have noticed. Tech stocks are starting to regain their “mojo”. The tech-heavy Nasdaq climbed 2.5% on Thursday. It’s up 12% so far in 2023, marking one of its best starts to a year. It resumed its 50-day, 100-day and 200-day moving averages.
Tech stocks clearly have new momentum.
Can it last? Yes. But more than that, tech stocks are about to catch fire and stage one of their biggest comebacks ever.
For what? Inflation and rate hikes – or more precisely, the lack of these two things.
In 2022, tech stocks have been dragged down by rising inflation and rising interest rates. The two headwinds will disappear in 2023.
Inflation – as measured by the consumer price index – peaked in mid-2022 at 9.1%. It has since fallen as low as 6% in February. Looking at real-time Truflation data, which measures millions of data points and contrasts outdated government measures, it looks like inflation is heading towards 4% in March.
Inflation is collapsing unequivocally.
Meanwhile, interest rates will likely stop rising soon.
The financial sector began to break down over the past week due to the Fed’s rapid interest rate hike. Bank of Silicon Valley And Signature Bank failed. Swiss credit (CS) And First Republic (FRC) almost failed.
Certainly, these failures have not broken the back of the American economy. The US government basically saved SVB and Signature. The Swiss government saved Credit Suisse. And the big Wall Street banks saved the First Republic.
But the Fed knows that if it keeps pushing the limits — and stays the course with rate hike after rate hike — the pauses will intensify. And bigger pauses could crush the economy.
The Fed does not want to crush the economy. And he also knows that inflation is falling rapidly. So the most likely way forward is a 25 basis point rate hike next week and then a pause.
Net-net, inflation and interest rates have been rising throughout 2022. Now neither will rise in 2023.
This inflection point marks the start of the massive comeback in tech stocks.
The last word
Historically speaking, whenever the Fed interrupts a rate hike cycle as inflation falls – exactly the situation we will have in 2023 – tech stocks always outperform:
Either this is the first time in history that the combination of stable interest rates and falling inflation equals tech stocks underperforming, or…
Tech stocks are about to stage an epic comeback.
We’ll go with the latter.
Tech stocks have regained their mojo and the party is just beginning.
But if you want to maximize your returns on that comeback, you can’t just buy the Invesco QQQ ETFs (QQQ) – an ETF that tracks the Nasdaq.
You need to buy the high flying stocks that will lead this rally.
In 2020 — the last time tech stocks made a big comeback — more than a dozen rose more than 1,000% in a year.
The Nasdaq could rise 100% in the next two years. But some individual stocks will rise much, much more than that.
Find out what actions could lead to this epic comeback in 2023.
As of the date of publication, Luke Lango had (neither directly nor indirectly) any position in the securities mentioned in this article.