FINANCE - TECH STOCKS - WHY SOO HIGH? MISPERCEPTION?

Stock index seem to be really too high considering the fear of the recession. part of that could be affected from the massive presence of technologz stock inside the most famouse indexes. As we know, tech stocks are moving in a different waz from the other companies and could affect the perception of how the market is thinking.

Let's have some thinking togeter.

Why Tech Stocks Remain High Despite Recession Fears

Tech stocks have continued to perform well, even amidst recessionary concerns, due to several key factors:

1. Long-Term Growth Potential: The tech industry is often seen as a driver of long-term economic growth. Investors believe that tech companies can innovate and adapt to changing economic conditions, making them attractive investments even during downturns.

2. Digital Transformation: The pandemic accelerated digital transformation across various industries. This trend has boosted demand for tech products and services, benefiting tech companies.

3. AI and Innovation: Advancements in artificial intelligence, cloud computing, and other emerging technologies offer significant growth opportunities for tech companies. Investors are optimistic about the potential of these innovations to drive future revenue growth.

4. Market Dominance: Many tech giants have established strong market positions and brand recognition. This dominance can provide them with pricing power and resilience during economic downturns.

5. Investor Sentiment: Despite recession fears, investor sentiment towards tech stocks remains relatively positive. Many investors view tech companies as a safe haven or growth engine, even in challenging economic times.

However, it's important to note that the tech sector is not immune to economic risks. Factors such as rising interest rates, geopolitical tensions, and increased competition can impact tech stock performance.

The percentage of tech stocks in the top 20 stocks of the S&P 500, by market cap, can vary over time due to changes in market conditions and company performance. However, as of early 2024, tech stocks constituted a significant portion of the top 20.

Here's a rough estimate:

• Around 35-40% of the top 20 S&P 500 stocks by market cap were tech companies.

This dominance is largely due to the rapid growth and innovation within the tech sector, as well as the increasing reliance on technology in various industries.

Please note that this is an approximate figure and may have changed since then. For the most accurate and up-to-date information, I recommend checking financial news sources or consulting with a financial advisor.

As of early 2024, some of the tech giants that typically dominated the top 20 S&P 500 stocks by market cap included:

• Apple

• Microsoft

• Alphabet (Google)

• Amazon

• Tesla

• NVIDIA

• Meta Platforms (Facebook)

the stocks mentioned (Apple, Microsoft, Alphabet, Amazon, Tesla, NVIDIA, and Meta Platforms) are not included in the Russell 2000.

The Russell 2000 is an index that tracks the performance of the smallest 2,000 companies in the Russell 3000 index. These companies are generally considered to be small-cap stocks.

The companies you listed are much larger and are typically included in the S&P 500. The S&P 500 is an index that tracks the performance of the 500 largest companies in the United States.

Russell includes smaller stocks in terms of market cap, and its trend is verz different from the trend of nasdaq, that seems exploding to the skx. the influence of tech stock could lead to this misperception and, in this period, a rapid view to Russel 2000 sometimes could help to align again the feeling to the market.

Written by Alberto Aimar