Tech stocks have had a terrible start to 2022. The Nasdaq is down more than 10% since peaking in November, falling below its 200-day moving average for the first time since April 2020. Most of that damage comes are produced recently, with the index suffering its fourth worst start to a year in history.
The signs were there, says Willie Delwiche of All Star Charts. More Nasdaq stocks were hitting new lows than new highs at the November peak, Delwiche notes. Since then, 90% of trading days have seen more lows than new highs.
About four out of 10 Nasdaq stocks have already halved. That’s remarkably high — typically only one in eight stocks have fallen that much when the Nasdaq is within 10% of its peak, according to Ned Davis Research.
Yet there is nothing inherently bearish about a bad start to the year. Likewise, double-digit corrections are not a bad omen. Six and 12 months later, stocks have gained two-thirds of the time, according to Bespoke Investment, although median returns are below par.
Yet investors remain wary. Bank of America’s latest survey of fund managers shows allocations to tech stocks have fallen to their lowest levels since December 2008.
Last week, Richard Bernstein Advisors (RBA) warned that the Nasdaq could take a 50% drop in 2022. RBA thinks tech stocks are in bubble territory and they’re not alone. According to a global poll conducted by Deutsche Bank, nearly half – 49% – of respondents think US tech stocks are in a bubble.