(Bloomberg) — Nearly 70% of technology stocks have fallen so far that they are in a bear market (down more than 20%), and nearly a third have fallen more than 50% from their peaks.
But according to a new report, if the tech bubble from more than 20 years ago is any guide, they may be falling further.
In 2000, more than 90% of the tech sector was in a bear market, within two months of its March peak, according to Richard Bernstein Advisors Dan Suzuki.
After that, “the mother of all dead cat bounces resulted in tech stocks rebounding by over 30% and recovering about two-thirds of their initial losses,” Suzuki said in the report. That boom tempted investors to get back into the tech — and the sector fell 82% over the next two years.
The report noted that in the earlier bubble, the tech and telecommunications sectors declined from 41% of the S&P 500 to just 16% in 2002. Today, the weight of the tech and telecommunications sectors (telecom is now classified as the communications services sector) in the S&P 500 has fallen, but by just 40% to 38% as of March 2.
What signals should we look for in order to assess whether the tech bubble has completely ended? Suzuki placed these markers:
- Valuations That Contract Significantly and an IPO Market That Chills
- Tech and crypto analysts are being seen as villains from the lion
- Less tech-focused investment products like ETFs
- Canceling tech- and innovation-focused TV and news columns
- People are no longer leaving jobs to join early stage start-ups or trade crypto
- And the fact that “no one will care to read a report like this when the bubble has deflated.”
To contact the author of this story:
Susan Woolley in New York [email protected]