The US tech market has had an incredible run. Prices of the leading companies have risen to nosebleed levels to such an extent that even perma-bulls are starting to wonder whether these levels are sustainable.
The world now thinks in trillions rather than billions. Im old enough to remember when hundreds of thousands was a thing.
Let me be clear, I am not a momentum investor, my investment DNA is contrarian value investor. Yet I’m not going to be fashionable bearish. I think there is a bubble coming in the Nasdaq and we need to hold that in mind as things develop.
The first thought to recall is that bubbles can long outlast logic. When the market going into a bubble it begets a logic of its own. When this magic spell breaks down comes prices and suddenly no one remembers why things go so out of hand or cares to remember they believed in it.
So here is the big, big picture that defines the status quo.
Granted this is a generational chart, but it has to steepen or break or, of course, steepen then break. I believe the latter is what comes next but it wont be an overnight thing, there is a saga coming up.
My thesis is that we have a future final vertical to come before a big break down and as investors we have to try and miss that pull back while trying not to miss the best of the bubble’s rise.
The Nasdaq is the driver of the market. It makes the running. Behind it jogging along is the good old DOW and it tells a different story. While its hard to imagine the Nasdaq is suddenly going to implode the Dow suggests the possibility of a bear market.
Here you can take the perspective of a bull or bear and watch which outcome is correct as it unfolds, though I think bears will not get paid in what comes next. I’m a reluctant bull.
However, the faster the ascent of the Nasdaq in the coming years the more vulnerable to a very harsh decent. Markets love to overshoot as FOMO takes hold and the swagger of risk hungry winners pulls in the greed driven tyros, but we are not there yet.
Fundamentally AI is going to set the global economy alight and if we can avoid global governance setting the world of fire, the world is going to enter a period of extreme abundance making a mockery of the current economic scale which is turn will drive the market to higher highs.
This is how the Nasdaq gets to 50,000. However, the speed of which it heads there will heavily influence the likelihood of crashes along the way.
Here is a chart to illustrate what can be too much of a good thing:
I’m expecting the proposed bubble to rise somewhere between Red and Amber, give a strong chance of pull backs along the way.
Interest rates are coming down, AI is coming up, QE is on the way, the US government is going for broke on growth and with it a historic pump.
WCGW
…plenty.
… but you cant sit it out.