If technology stocks plunge again, is it an omen of crash or a chance to make profit?

Reasons for the surge in technology stocks

Quantitative easing
Quantitative easing(QE) measure has caused a lot of funds to flow into the stock market, causing the stock market to deviate from the fundamentals. In the past three months, the Fed released more than $3 trillion through unlimited quantitative easing measures.
For example, in 2008, the US subprime mortgage crisis triggered a global economic crisis. The Fed also adopted a policy of "spending water", which made US stocks out of an 11-year bull market since 2009. Now the Fed’s “no bottom line” rescue policy has directly reduced interest rates to zero, unprecedented in history, even more powerful than in 2008. Coupled with the US government’s $2.2 trillion rescue bill, it also promoted capital flows, which in turn pushed up stock prices.

Tech companies' revenue soars
Technology companies, especially the six major technology stocks Facebook, Apple, Amazon, Netflix, Microsoft, and Google, are all vested interests in the epidemic, and their stock prices have risen as a result. Among them, Amazon and Apple set their highest stock prices since February.

Market hype
In May, the unemployment rate fell, the manufacturing index rose, and the White House's confidence in economic recovery, under the market speculation, many investors tend to believe that the market is in a V-shaped recovery. Investors are not willing to miss the opportunity to enter the market while bargaining. Apart from the fear of missing out on good opportunities, investors seem to have not many investment options in recent years. The yield on the 10-year US Treasury bond has been hovering at a low level for a long time, the bond market’s return rate has fallen, and the stock market has continued to rise, investors naturally don’t want to miss this opportunity.

Cause of the crash

Steve Massocca, managing director of Wedbush, believes that overvaluation is the main reason for the decline in technology stocks, but the second decline is only an adjustment.

In addition, many investors profit by selling at high prices. As long as they are investors who entered the market two weeks ago, they still enjoy profits on the books, so you may wish to sell a part first to get back part or all of the cost. If the stock price in your hand has doubled, you will get all the cost back if you sell half of it, and the remaining cost will be zero. If the stock in your hand has doubled, then selling one-third of the cost has been paid back Up. The current adjustment is that a large number of investors who have already made profits on the books are selling arbitrage.

Tech stock bull market is expected to continue

There are opinions that the Nasdaq has outperformed recently and it is very likely to repeat the mistakes of the 2000 U.S. "Tech Internet bubble". In the millennium technet era, news of big companies buying technet companies and auctioning 3G licenses flooded the market almost every day. At that time, many companies boasted that they were Kewang companies just because they had their own websites, and they had no actual technical support. Compared with today's Kewang technology, they were far from the same. In addition, these companies are not actually profitable, so the bubble burst is very reasonable.

However, compared with this bull market in technology stocks, the mainstream market believes that the strength of new economic stocks is solid and the potential is still great. The current environment is still favorable to the stock market, because the Fed's low interest rate is maintained for at least one year, which is favorable for capital to flow into the stock market. Coupled with the brilliant performance of US corporate financial reports, the proportion of in line with expectations is as high as 84%. The financial reports of most of the technology companies were even better than expected. With the product upgrade and transformation and the launch of 5G in the second half of the year, it is believed that the bull market in technology stocks will continue for some time.