- RBAdvisor’s Dan Suzuki says stocks are in a dotcom-style bubble that could affect almost 50% of the market.
- He told CNBC there was a “massive downside risk” for the market right now.
- He flagged tighter liquidity, slowing profits, and high valuations as his three top market risks.
The current rout in technology stocks may not be short-lived, which is like the dotcom bubble and could hit almost 50% of the market if it pops, according to RBAdvisors’ Dan Suzuki.
In an interview with CNBC on Tuesday, Suzuki talked about the risks of investing in tech stocks, and compared the frothiness in the sector to the dotcom bubble of the 1990s, saying: “It’s never too early to sell.”
He said he thinks any protracted sell-off in tech could reverberate cross the broader equity market, given the weight tech stocks have in the major indices now compared to a decade ago.
“There’s massive downside risk. I’m talking about a bubble that reaches out to as much as 50% of the market,” he said.
He said tighter liquidity, slowing profits, and high valuations as the biggest market risks in 2022.
The Nasdaq 100 index was last trading around 15,180 points, down around 0.2% on the day, having lost almost 10% since late November’s record high.
“The only way to protect from a bubble is to get away from it,” Suzuki said. “We’ve seen this movie before. These things don’t move in straight lines. I wouldn’t be surprised to see a bit of a reversal here.”
In the late 1990s, investors piled into any company associated with the internet, pushing the valuations of the likes of Amazon and IBM to dizzying heights. But the rally came to an end in early 2000, when the Federal Reserve began raising interest rates to combat inflation, sparking an aggressive sell-off in some of those stocks that had traded at record highs. The index lost over 30% in two months.
Suzuki noted that Amazon stock was down by as much as 96% at one point, as were many of its early-internet peers.
“That was not the exception, that was the rule,” he said.
He said positioning stock portfolios relative to the bubble and interest rates will be important. “Those are the key risks that investors need to be focused on,” he stated.
“We haven’t really scratched the surface of what they’re really going to do to people’s portfolios,” he said.