US Tech Stocks Hit 18-Month Lows, Nasdaq 100 Outperforms S&P 500

Two key indicators of US tech stocks have hit recent lows, according to an analysis. The US tech-to-global-tech ratio dropped to 1.6, the lowest in 18 months, while the US tech-to-non-tech sector ratio fell to 1.5, also hitting an 18-month low. These declines have exceeded those during the 2022 bear market. Year-to-date, the Nasdaq 100 Index has fallen about twice as much as the S&P 500 (excluding information technology).

This significant drop in key indicators suggests a challenging environment for US tech stocks. The US tech-to-global-tech ratio, which compares the performance of US tech stocks to global tech stocks, has not been this low in over a year. Similarly, the US tech-to-non-tech sector ratio, which measures the performance of US tech stocks relative to other sectors in the US, has also reached an 18-month low. These indicators point to a broader trend of underperformance in the US tech sector.

The analysis highlights that the declines in these ratios have surpassed the levels seen during the 2022 bear market. This is a concerning development, as it indicates that the current downturn may be more severe than the previous one. The Nasdaq 100 Index, which is heavily weighted towards tech stocks, has seen a more significant decline compared to the S&P 500 (excluding information technology). This disparity suggests that investors are particularly bearish on the tech sector.

The underperformance of US tech stocks could be attributed to several factors, including macroeconomic uncertainties, regulatory pressures, and concerns about the sustainability of growth in the tech sector. Investors may be reassessing their positions in tech stocks, leading to a sell-off and a decline in key indicators. The current environment may present challenges for tech companies, but it also offers opportunities for those that can navigate the market volatility and maintain their competitive edge.