Technology Stocks in 2021. A Forecast

Dear Reader,

Technology stocks in the US measured by the Nasdaq Composite index are up more than 40 % up until now in 2020. This is a huge gain for any index in historical perspective.

If the Nasdaq Composite notches a small gain or even a loss in 2021 things may calm down and the obvious technology bubble that has formed may not crash abruptly.

I forecast technology stocks will be buoyant again in most of  2021 and could rise by 20 % in the first half of 2021. Then by end of 2022 a huge stock market sell off could ensue lead by a fall in the prices of technology shares.

Technology stocks are simply overvalued. Many of the technology stocks listed in the US have to become leaders in their respective industries, notch up consistent yearly revenue growth rates of above 20 % and achieve net profit margins of above 20 % to substantiate their current valuations. Yes, as far as revenue growth is concerned, many listed technology companies meet the 20 % yearly revenue growth criteria, but most of them have negative net profit margins of more than - 20 %. Many mini bubbles like GoPro, Groupon, Fitbit, Blackberry, DDD have already pricked.

Basically, we are witnessing the greatest financial bubble in history helped on by central banks money printing. Yes, information technology is the future, but technology stocks' market capitalizations are discounting growth that can come to fruition in 30 years in total. And the assumption is that it will happen with something like 90 % certainty. Many things can go wrong. Artificial intelligence may not live up to the current expectations, a war or virus may come which could slow down the fourth industrial revolution we are witnessing. Even if everything turns alright, not all technology companies trading at high valuations today will achieve the huge revenue and profit growth discounted today in most listed technology companies' valuations.

All in all, I think the strong bull run in technology stocks will go until the third quarter of 2021 and a stock market crash could come before end of 2022. The reasons for the crash can be many - erroneous monetary policy, higher bonds yields, coronavirus mutations, wars or just plain old human fear could trigger a huge sell of in equities markets.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich