Tech Roars Back | The Investors Edge
By John Stewart
Chief Investment Officer at Farmers Trust Co.
Week in Review: Tech Roars Back
After a strong market rally in April and May, tech stocks struggled through June and July, with many of the former high flyers down anywhere from 20 to 50% from their peaks.
Starting on July 30, stocks staged one of their best four-day stretches in history, with the NASDAQ bouncing nearly 10% over that time frame.
So was this just an oversold bounce or the resumption of the upward trend? Keep in mind, the tech-heavy NASDAQ is still roughly 5% below its all-time high reached at the beginning of June.
Broadly speaking, earnings reports for the big tech companies have been quite strong, although some have been met with harsh reactions from investors expecting even more, especially as it pertains to forward guidance.
Overall earnings revisions have stagnated somewhat, and that could portend more volatility as we enter the notoriously volatile part of the calendar from August to October.
Featured Insight: It’s What You Keep
The phrase “it’s not what you make, it’s what you keep” means that true wealth comes from saving and growing your money, not just earning a high income.
Your savings rate and money habits predict your net worth much better than raw salary numbers do.
Unfortunately, the U.S. savings rate has been declining for the past several years and is currently sitting as just 2.7%, well below the long-term average of 8.4% from 1959 to 2026.
The higher cost of living is certainly straining many individuals, but there has been a trend toward more lavish and unnecessary spending even among high income households.
This is likely unsustainable,and could lead to spending restraint in the future – possibly out of necessity, if not by discipline.
Looking Ahead: Deal or No Deal
It seems we’ve been talking about an Iran deal and the opening of the Straight of Hormuz for years now.
But with gas prices rising back toward their prior highs and interest rates continuing to march higher, there’s only so much the economy can take before real damage is done.
We’ve obviously seen a more volatile stock market the past couple of months, but the S&P 500 index is sitting at or near all-time highs.
Are stocks whistling past the graveyard or is the underlying economy stronger than we think? Either way, it is important that energy prices and inflation start to moderate sooner rather than later.
If inflation expectations start to move higher in earnest, the markets will begin to experience significantly more volatility.
