Is it a new ‘New Era’ or just the surge before the crash?

Apple almost doubled in 2019 (even after downgrading its own earnings expectations). Microsoft was up nearly 60%. The broader Nasdaq 100–still tech heavy–was up almost 40% in 2019. That’s its best gain since…2009!

Tech stocks added $7 trillion in market cap in 2019 while global stocks combined added $17 trillion. Low rates and record central bank liquidity seem to be finding their way into a narrow class of expensive stocks in the same sector. What now?

For most of the last decade, share price growth was matched by earnings growth–until 2019. In the year just completed, stock rose mostly as a result of multiple expansion–investors paying more for stagnant earnings. There’s ‘upside’ left if investors drive valuations up even higher (as defined by the PEG ratio). But not much…and not for long.