2021 US stock market downturn highlights tech giants' high valuations, with S&P 500 technology sector trading near a two-decade high.
A recent US stock market downturn has brought attention to the high valuations of tech giants like Nvidia and Microsoft, having significantly contributed to market growth this year. The S&P 500 technology sector trades at 29.5 times 12-month earnings estimates, close to a two-decade high. The overall S&P 500 index is also elevated historically, currently trading at 20.7 times forward estimates compared to its long-term average of 15.7. This increased focus on valuations could lead investors to sell off stocks if markets face further turbulence due to interest rate changes or political uncertainties. However, better-than-expected earnings could bolster the case for tech stocks' elevated valuations and provide a confidence boost for investors.