Bernstein on tech rout: ‘we haven’t reached capitulation yet’

“After the last tech bubble, all the stories came true about how the internet would change the economy and business, but if you had bought Nasdaq in December 1999, it would have taken you 14 years to break even.

“So, we must separate out the story from valuations of assets, and tech is still one of the most overvalued sectors in the market today.

“Long term (market) sentiment is based on three stages. When you start getting a bear market, people say it is temporary or transitory. Then you hear people talking about its bottoming. You will know it is over when people say it will never end.  

“When people attach permanence to a bear market or bad economic data, that is when your contrarian trigger should start wiggling. I do not think we have seen capitulation at all. How many times have we heard people talking about entry points back into technology? The Nasdaq is down about 30% from its peak, in 2000 it was down 75%. We are in the midst of it.

In the first innings  

“It is hard to argue the Fed is even trying to slow the economy, let alone slow inflation. It is like shooting elephants with a pea shooter. They are hunting, but how effective are they going to be? We have a long way to go before the Fed is literally fighting inflation. We are only at the top of the first innings. 

“I do not think a recession is imminent. Eventually, we will have one because the Fed will panic at some point and will likely overtighten. But the odds of that happening in the next few months or even this year seem low to me. If we are going to have a recession, this will be the most well-forecasted recession in my career. Usually, recessions surprise people, they bite people in the tush.”

Richard Bernstein, chief investment officer at Richard Bernstein Advisors 

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