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Are Tech Stocks Invincible?

Today’s market environment is reminiscent of the late 1990s in terms of how valuations have diverged across market sectors.  Back then, just as today, seemingly invincible technology stocks commanded premium valuations.  The chart #1 below looks remarkably similar to today (chart #2). 

Over the 2000’s, tech stocks languished while cheaper markets performed well.   While we do not wish to suggest that history will repeat itself precisely, we believe investors should stick with allocations to attractively priced markets that have underperformed in this decade, including overseas and Value-style stocks.

Source: Hefren-Tillotson, Bloomberg; Data as of 9/3/18.  NYSE FANGS Index represents a grouping of aggressive technology stocks such as Facebook, Amazon.com, Netflix, and Alphabet (parent company of Google).  Growth stocks = Russell 1000 Growth; Mid Cap Stocks = S&P 400 Mid Cap; Small Cap Stocks = Russell 2000; Value Stocks = Russell 1000 Value; High Dividend Paying Stocks = DJ Select Dividend Index; Foreign Small Cap Stocks = MSCI EAFE Small Cap; Emerging Markets = MSCI EM.   PAST PERFORMANCE DOES NOT PREDICT FUTURE RESULTS. Ignores taxes and other costs of investing.

Source: Hefren-Tillotson, Bloomberg; Data as of 9/3/18.  NYSE FANGS Index represents a grouping of aggressive technology stocks such as Facebook, Amazon.com, Netflix, and Alphabet (parent company of Google).  Growth stocks = Russell 1000 Growth; Mid Cap Stocks = S&P 400 Mid Cap; Small Cap Stocks = Russell 2000; Value Stocks = Russell 1000 Value; Emerging Markets = MSCI EM.   PAST PERFORMANCE DOES NOT PREDICT FUTURE RESULTS.  Ignores fees, taxes, and other costs of investing. 

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.
Brian J. Koble, CFA®
Director of Research

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