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Denis Sergienko • 2022-07-15

Bulls May Expect the Tech Bubble to Deflect

Bulls May Expect the Tech Bubble to Deflect

It seems like it is not quite a great time for getting bullish on your tech stocks trading. Despite all positive predictions, the tech bubble is about to deflect. The sector has recently shown a solid rally featuring stock value growth. However, it feels like that rally is doomed.

Experts say that the tech stock market is far from bottoming, meaning most investors can fail to grasp the moment when it stops growing. The markets are very uncertain today. However, one thing is crystal clear – the profit growth will keep on slowing down. We are about to see extremely tightened liquidity. As a result, we have an environment that is far from being good to jump into speculative bubble stocks. What’s more, current stockholders will have to seek other ways to trade on the falling market at some point.

How About Numbers?

Last weekend brought us some Nasdaq heavy tech bounces dropping from 216 points to close almost 2% higher. At the same time, S&P 500 was about to show a turnaround though still erasing a 2% loss earlier that day. As for the Dow, it closed 129 points lower.

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It seems like investors continue playing with fire. We are watching a so-called do-not-touch-it situation, where the liquidity is about to be pumped back with the signs of bottoming profits.

So, the Tech Rally Is Over?

If we have a look at any tech company despite the size, turnovers, cash flows, and quality, we can see that the entire sector has been experiencing a tremendous liquidity record over the last 5 years. So, yes, the rally is doomed, as it eventually leads to a bubble formation.

A possible way out here is to look for things that can potentially buck the trend, things that potentially bring more positive features. It will let investors develop and play defence when trading on a falling and post-crisis market.

Experts suggest considering Chinese markets to target investments within the 12 or 18-month horizon. When considering valuation basis, China is much cheaper. Besides, it is yet the only country trying to pump liquidity into its economy. This is an opposite approach compared to what we can see in the rest of the world.

Experts predict a global slowdown that can be followed by a global recession. This is not the best time to jump into the market, which can put your portfolio at greater risk. So, pedalling and keeping it bullish is hardly the right choice.