After blasting steadily higher since the beginning of the year, tech stocks just suffered a setback.
The Nasdaq — which hit an all-time high at the tail end of last week — dropped over 3% by Monday morning. It was the exchange’s worst two-day losing streak of 2017.
What was driving the sudden dip?
Investors are beginning to fear that top tech stocks are overvalued. Namely the FANG companies — Facebook, Amazon, Netflix and Google.
As a result, buying interest shifted to different sectors, like energy and financials.
Now, the trend quickly reversed course. Tech stocks once again ratcheted higher this week.
That shouldn’t be surprising to Wall Street Daily readers. We’ve been providing regular coverage of the ongoing bull market for tech.
With 73% of technology stocks beating analyst estimates for earnings last quarter, we should only see more momentum in the coming weeks and months. Especially when you consider that capital is flooding into tech stocks at the fastest pace in 15 years.
But that doesn’t mean you should go all in on tech.
The recent volatility should act as reality check — underscoring the importance of diversifying your portfolio.
So I asked senior analyst Martin Hutchinson to provide a quick rundown on the best way to approach diversification.
His full analysis is below.
Ahead of the tape,
Louis Basenese
Chief Investment Strategist
Question: Martin, you’ve agreed to help us compile a library of the most important investment catalysts on Earth. I’m talking about baseline concepts that every investor should know.
Today we’ll be discussing how to properly construct a portfolio.
Let’s jump right in, Martin. What’s the first thing any investor needs to know?
Martin Hutchinson: The big question for investors is how to allocate money between sectors within your stock portfolio — and then how to allocate money between stocks against bonds and other assets.
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