No, the sale of the technology was not inevitable and will not last either.
A A big part of successful trading and investing is understanding how we humans are connected and allowing that understanding into our decision making. A significant trend in the human psychological make-up is a form of recency bias which assumes that what happens now will continue to happen, no matter how illogical that assumption is. This is what we’re seeing in some quarters right now when it comes to tech stocks.
There are those who say that the massive sell-off that we saw in the first week of this year was still ahead and will continue. It sounds scary and for the immediate future they could very well be right, but simple logic and every piece of evidence we have indicates that they will, at some point, be wrong. Their argument is that we started from record highs, so an adjustment had to come, but the fact that we hit record highs shows that the bad guys have always been, without fail, wrong in the past. They will be this time too, and not just because the weather favors the bulls.
What we have seen over the past decade is a fundamental shift in the way society operates and where wealth is generated. These changes occur occasionally in economic history and are driven by innovation. The invention of the steam engine caused a boom, for example, but then the internal combustion engine came along and forced trains to abandon while ushering in the automobile boom. A series of otherwise unrelated things such as the birth control pill and prepared and frozen foods have combined to expand the workforce by empowering women, massively expanding the talent pool and creating another boom. Each of these “revolutions” ultimately led to growth, but each time there were those who failed to recognize the potential and predicted disaster.
Right now there are a few fundamental changes happening at the same time, but all of them are rooted in technological improvements. Globalization of the supply chain may have dubious employment benefits for workers and hurts some, but from a purely economic perspective, it is an extension of an idealized state where assets are allocated. in the most efficient way possible. However, this cannot be done without sophisticated computer programs to track and manage the overall corporate footprint. Then there is automation, again a bad thing for some but, from a purely economic point of view, an improvement in efficiency that will ultimately benefit society as a whole. Again, this is a technology dependent change.
It’s fundamental changes in the way we work and the way wealth is generated that will increase wealth as a whole. How we distribute this wealth will be a problem for politicians and philosophers, but, if the world’s total wealth is growing rapidly, it makes sense that the value of equity in related companies also increases.
The stock market, in pricing this, is just doing what it’s supposed to do.
When you hear a Wall Street analyst, TV headliner, or online commentator tell you that the sale of the technology is bound to happen and will continue for a while and be of major importance. , ignore them. It may well be that some individual actions have been taken in an unwarranted manner in the rise, but the overall outperformance of technology in general is fully justified and still has a long way to go.
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