Tech stocks are unequivocally in “bubble” territory, a chief investment officer told CNBC on Monday, but that’s not to say the recent “tech wreck” is going to continue in the short term.
U.S. stocks closed lower for the second consecutive session on Friday, bringing an end to a volatile trading week ahead of the long Labor Day weekend.
The S&P 500 tech sector fell more than 4% for the week, intensifying speculation that the stock market shakeout was likely not over yet. The space had largely been responsible for the broader market’s strong comeback off its coronavirus lows.
“I think we are certainly in bubble territory,” Jonathan Bell, chief investment officer at Stanhope Capital, told CNBC’s “Street Signs Europe” on Monday.
Bell suggested there had been “so many good reasons” for investors to own the likes of Google-parent company Alphabet, Amazon, Apple, Microsoft and Facebook, pointing to their combined outperformance in the wake of the pandemic as something “everyone is talking about.”
“It’s not that these businesses aren’t great businesses that are going to carry on going, it is just the exuberance related to them,” Bell warned.
Shares of Amazon have shot up 78% so far this year, leading the so-called “FAANG” stocks. Shares of Apple and Netflix have skyrocketed 65% and 59%, respectively, while shares of Facebook and Alphabet have risen 38% and 19%, respectively, this year.
Bell pointed out that the so-called “big five” tech stocks already represent around 20% of the U.S. stock market, and given how big the U.S. market is globally, the tech giants amount to 12% of the MSCI World Index.