The spread of these contagious narratives has a determining effect on the stock market valuations. For instance, in the late 1990s, the positive dot.com narrative resulted in massive over-valuation of firms that had no viable businesses. It was followed by an era driven by the opposite narrative, in which anything to do with technology was stock-market poison. Amazon barely survived this “nuclear winter” for tech stocks of that period.
While tech stocks with strong businesses are lower than their recent highs, as a result of the currently contagious narrative for investors to “get out of tech,” these stock are still doing better collectively than the the average S&P 500 company, as shown in Figure 1.The memes that “tech is dead” or that “customer choice will disappear” are nonsense. Nothing in the current uptick of inflation has changed the over-arching the narrative that the future of the economy lies in tech.
It is a forward-looking measure, incorporating the combined judgment of the stock market as to the future shareholder value of each company. In this respect, it differs from indices like the Fortune 500 which ranks firms by way of the backward-looking measure of total revenue.
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When your tech stock shares have dropped 30, 40, or 50% you don't give a shit about the what's happening with the S&P.
“This is what we want you to see so you don’t think we are to blame”. -MSM
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