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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Tech stocks – is the correction over?

We look at the tech sector and see whether the bullish trend remains intact. 

Nasdaq
Source: Bloomberg

For all the excitement about the great correction of early 2018, it should come as no surprise that the tech sector, the big performer of the past nine years, has clocked up a fresh all-time high in early March.

From a low of 6200 in early February, the Nasdaq 100 (US Tech 100 on the IG platform), stormed back to its previous high of 7033, and then surged to create a new record at 7186. So, yes, the tech correction is over. But there is more to it than this. The speed of the recovery is also worth noting. Having suffered its worst loss since the beginning of 2016, it only took a month for the market to recover completely. The index is up around 8% for 2018, an already remarkable return. But there is probably more to come.

The famous trader Jesse Livermore noted that, in a bull market, it makes sense to buy the strongest performer. This is really a form of momentum trading – find the winners, and stick with them. Compared to European markets, which essentially have gone nowhere for a year or more, the Nasdaq’s performance marks it out as one of the winners, if not the winner, of the current bull market.

There is a fundamental basis to the tech index’s outperformance too, showing that this is not just built on euphoria and ‘fear of missing out’. By the beginning of March, most of the tech stocks within the S&P 500 had reported. Total earnings were up by nearly a quarter, while revenues were up 11%. Further gains are expected for both earnings and revenues in 2018.

So, the fundamentals are there, while the technical breakout to new all-time highs provides another attraction. Much has been made of the anniversary of the nine-year ‘bull market’ this month, but there looks to be more to come for tech stocks, which have finally lived up to the hype of 1999.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.  Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 

CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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