EXPERTS WARN TECH STOCK BOON A BUBBLE WAITING TO BURST

The boom in the shares of US technology giants is a bubble that will burst once interest rates increase or “over exuberance” in the tech story fades, Pascal Blanque, chief investment officer at asset manager Amundi.

“It’s a perfect bubble waiting to burst. It’s not if, but when,” Blanque told the Reuters Global Investment Outlook Summit, adding that you “cannot justify the current valuations” and investors should adjust their stock portfolios accordingly.

Other panelists at the summit session were also cautious about the run-up in technology stocks, particularly as US regulators and lawmakers look at whether the companies have become too powerful. But they said they did not expect a 2000-style dotcom crash in prices.

Erik Knutzen, CIO at Neuberger Berman, said tech shares were not “massively over-valued assets” but rather “long duration assets” and made sense to own in a low inflation world. Technology shares have rocketed in 2020 to record highs, both fueling and surpassing broader stock rebounds. The tech-heavy Nasdaq has soared 38% and is poised for its biggest annual jump since 2009. That contrasts with a rise of around 14% in the broader S&P 500 index and a 5% gain in the blue chip Dow Jones.

With technology seeping into every facet of life and helping many businesses and individuals operate through the coronavirus pandemic, any correction in stock prices was likely to be “tempered,” said Afsaneh Mashayekhi Beschloss, CEO, RockCreek. “There will be corrections but not necessarily of the same scale of the past,” she said.