Are We Entering A Global Tech Bear Market?

Tech shares globally are teetering.

The rise in yields (especially in the US) has undercut secular growth favorites and otherwise forced a rethink around nosebleed valuations, with tech often cited as one of, if not the, most stretched sectors.

This is familiar territory for regular readers and for US investors more generally. Last week was a reminder that names like Tesla and high-fliers like Cathie Wood’s ETFs, are at risk of suffering steep declines in the event yields move abruptly higher.

A quick glance around the globe reveals widespread malaise. For example, tech shares in Europe sat at a one-month low Thursday after falling more than 2% at one juncture.

Chip makers were under siege, but so were stay-at-home winners, increasingly viewed as potential losers in the reopening trade.

One of the most notable manifestations of this dynamic is visible in the relative performance of Hong Kong tech shares. The figure (below) depicts an egregious stretch of persistent underperformance, with Thursday marking another particularly acute episode.

There’s more to consider in Hong Kong than the knock-on effects from rising US yields, but the point is simply to illustrate that tech woes are becoming “a thing” (so to speak) on a global scale.

In fact, the Hang Seng Tech index looks to have fallen into a bear market (almost) on Thursday.

In a testament to how far tech shares have run (and also to what, on some interpretations, is a mania in Hong Kong), the gauge is still up around 4% for 2021.

The point here isn’t to stoke fear or traffic in hyperbole. Rather, it’s just to point out that as the global vaccine push progresses and economies (hopefully) reopen, there’s a long way down for some of the names which benefited the most during the socioeconomic environment that typified 2020.

I think it’s entirely fair to say that some of the names which have run the furthest could easily fall 30% in a broad-based de-rating episode that comes about just as the reopening push gets underway in earnest in western economies.


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7 thoughts on “Are We Entering A Global Tech Bear Market?

  1. Covid aside, assuming the current trends from 2017 continue (from “Factfulness”), over the next 20 years the number of people on the Earth in extreme poverty will continue to decline, significantly.
    The number and percentage of the global population living on a middle class income will also significantly increase. Tech should continue to do very well, imho.

    1. Technological innovation will enable this middle-classing of the world population, but I’m not sure that tech in the US mode, built on rampant consumerism, will have a place in the global transformation.

      That is to say: today’s tech titans will not necessarily have a place at the table.

    2. Perhaps you are right about the Middle Class but as to poverty, not so much. A third of the world’s population still does not have daily access to potable water and a similar number don’t get enough food. In the county I live in, a top 20 metro SMSA, in the 150k pop. suburb next to mine, home of former President HST, more than 90% of the children are sufficiently impoverished to qualify for the highest level of school-based food distribution. The main food bank in the area, and there are other smaller ones, distributed over 60mil pounds of food last year, a record. Poverty is not going away soon enough, especially with a $7.25 minimum wage. Tech will not feed the impoverished in Africa, South America, and India.

      1. According to the CDC, 11% of the global population does not have access to a protected water source (this was 58% in 1980). Also, according to the WHO, the percentage of people who are undernourished has decreased from 28% in 1970 to 11% in 2015.
        I agree that the world has a poverty issue, and of course for those people living in poverty, it would be terrible- but if the positive trend of the past 20 years continues, the world will continue to make progress in reducing poverty- even if we go from 7B to 10B people.
        I highly recommend “Factfulness”, which comes with a Bill Gates recommendation.

      2. A quote from an old sci-if novel comes to mind: “ once the Invisible Hand has taken away all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity… there’s only four things [the US is] good at.”

        Global inequality does seem to be on the decrease even as it has heightened in the US. Those without access to water, food or electricity would presumably marvel at the idea of a food bank.

        Not to attribute this change of fortunes to the Invisible Hand. Globalization is about enriching the view, but it has some positive externalities. I’m just not sure that Google Ads or TickTock will be the engine of prosperity in sub-Saharan Africa. Maybe I’ll ask President XI.

        P.S. it’s music, movies, microcode and pizza. Those are the four things.

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