With the Nasdaq reaching all time highs on a daily basis and Apple’s market capitalisation breaking through $2 trillion many pundits are forecasting a crash / retrenchment in technology names. There is no doubting that valuations look extremely stretched, but what will stop this inexorable rise in tech companies?

Whilst both the S&P and the Nasdaq indexes continue to defy gravity, by contrast, UK markets remain negative year to date and many global companies are still showing negative returns for the year. We believe the catalyst for a sell off in technology and a rotation into more value oriented stocks will come when a trusted and reliable vaccine is found and that the global economy will return to a “new” normal. The possibility of inflation fuelled by Central Banks throwing money at the pandemic, will also underpin the profits of value orientated companies.

The below table details the past performance of the market indices mentioned above over the preceding five years.

Data source: FE Analytics

Past performance is not a guide to future performance and actual performance may vary.