Market PainThe market swoon has been widespread in the tech world. The tech-laden Nasdaq Composite Index, up 5.7% year-to-date as of November 15, is underperforming the broader market. The S&P 500 Index has advanced 6.5% over the same period. On top of that, the volume of bearish tech stock options has surged , according to the Wall Street Journal.
Visa HeadachesThere are two competing theories about why tech stocks have taken a hit. First, the incoming Trump administration is expected to take a tough stance on trade and immigration. The tech industry needs visas to import software programmers, engineers and other skilled foreign workers from abroad. If Washington clamps down on H-1B visas , that's bad news for tech companies, in my opinion.
ValuationsThen, there are the relatively rich valuations of tech stocks that were a cause for investor concern even before Trump's upset victory. As of November 8, the 12-month trailing price/earnings ratio for the S&P 500 tech sector was 20, compared with 18 for the S&P 500.
TakeawaySo far, in my opinion, the Trump era hasn't been kind to tech stocks. The prospect of tighter immigration policies could be a big negative for the industry even as tech stocks are sporting high valuations.
Photo Credit: Claudio Toledo via Flickr Creative Commons
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