I think tech is the new gold and that’s pumping the market

Think about it. If you hade billions of dollars and little faith in the economy, where would you put it? Gold? It’s near ATHs so the potential for loss is high. Bonds? At these rates? Cash? With infinite QE happening inflation could be a real concern. No it’s tech. Tech has performed very well over the past 20 years and many tech companies are minimally affected by the current environment. Some even benefit. What’s more tech has some of the biggest most stable companies there are with plenty of cash on hand to weather a storm. So tech seems like a safe bet.

If I’m right tech is acting as a safe place to stash billions of dollars. Because the S&P and the NASDAQ are disproportionately made up by large tech firms, and because those are seen as the best indicators for the broader market, this makes the broader market look better than it should. It’s giving people a false sense of confidence in the market as a whole.

What happens if the smart money no longer feels like tech is the safest place to store their money? The bottom falls out. What happens when mainstreet actually starts to recover? Billions of dollars flow out of tech and into other sectors. Much of it may go to small cap stocks. So when the economy actually starts improving, the S&P and Nasdaq may crater.

I will freely admit that I am an amateur with limited experience. So if someone with more knowledge on the subject, especially bonds, wants to correct me or tell me why I’m wrong, feel free. I’m hoping this will start a discussion.