VGT - XLK And The Return Of Irrational Exuberance

2024-04-12 09:57:33 ET

Summary

• Signs of irrational exuberance in the technology sector are becoming evident, with certain parts of the market trading significantly above trend.
• The recently launched Destiny Tech100 closed-end fund is trading at around ten times net asset value, posing a risk for investors.
• The XLK ETF has become excessively concentrated in a few names, with four companies representing more than half of the ETF's value.

We are increasingly seeing signs of irrational exuberance in the technology sector. Unfortunately, it is difficult to predict when the irrational behavior will end, or as John Maynard Keynes famously put it, "markets can stay irrational for longer than you can stay solvent." In any case, it is becoming clear that certain parts of the market are once again becoming a "musical chairs" game, where someone will be left holding the bag once valuations return to a reasonable level....

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