Moments after hitting a record high, the Nasdaq fell sharply off its highs to turn flat at the time of writing. The sudden drop may be a sign the market has reached at least a near-term top, which wouldn’t come as a shock given how high technology valuations are right now. Jerome Powell’s re-appointment as the Fed’s Chair means Biden has chosen the slightly more hawkish central bank out of the two candidates. If Powell presses ahead with tapering QE as planned, or accelerates the withdrawal of stimulus, then tech shares could drop sharply. This is because technology and other growth stocks carry lower yields relative to for example value stocks. With the Fed reducing it purchases of Treasurys, this would likely underpin their yields as the market front runs the central bank. Rising yields on benchmark government bonds would make them more appeal to yield-seeking investors, than overvalued technology stocks. Thus, a correction is imminent, and today’s reversal could be the trigger many bears were waiting for…
Source: ThinkMarkets and TradingView.com
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