History suggests tech shares poised for new highs in 2021

Column chart of Per cent showing Global tech stocks made big gains following mid-cycle corrections

The Nasdaq 100 index of the world’s largest technology companies suffered a tough run in September, shedding 5.7 per cent in its biggest pullback since the coronavirus shock in March. But if the trading patterns of the past five years hold, it may not be long before the sector rebounds.

The latest decline came as a frenzied tech rally ran out of momentum, continuing a highly volatile year. Even after the drop in September, and a 7.7 per cent decline in March, the index is still up about 30 per cent in 2020.

Analysis from UBS shows that between 2015 and 2019, mid-cycle corrections in global tech stocks lasted an average of a month from peak to trough, and caused the sector to lose 11 per cent. The scale of the rebounds over the following six months was, on average, 20 per cent.

This year has been supersized. In 38

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