Tech Stocks Suffer Market Correction: Is the Bubble About to Burst?

Last week proved to be grim for the technology sector as the Nasdaq Composite declined to levels not seen since March, inadvertently wiping out hundreds of billions of dollars. However, according to Research Affiliates founder and chairman Rob Arnott, last week’s events point to a more grim scenario, one that would eventually lead to a tech bubble burst.

According to Arnott, the economic lockdowns in response to the coronavirus pandemic have ultimately lead to the emergence of asset bubbles, which will eventually burst and create even more financial hardships into the future. The Nasdaq Composite, which is dominant in tech stocks such as Facebook, Amazon, Netflix, Microsoft, Apple, and Google (FANMAG) was the subject of a “correction” last week, suggesting that the tech bubble is nearing its end.

With respect to Apple stock, Arnott points to the tech giant’s recent decline of over 15% from its record high, suggesting that last week’s events were in fact the result of a market correction. When Apple reached its record-breaking milestone, it was worth more than the entirety of the FTSE index. Moreover, it is very unlikely that a single company such as Apple will ever produce more profits in the near future than the entire London stock exchange, thus further bringing validity to an impeding bubble burst.

Information for this briefing was found via Research Affiliates. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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