Technology Stocks is Still the First Choice in the Low-Interest-Rate Environment

    The Nasdaq 100 rose 1.5% on Tuesday and is already up more than 40% for the year, putting it on track for its best annual performance since 2009. Four of the index's components are up more than 220% for the year despite the worst recession on economy since the Great Depression. Tesla stock has soared 1,000% over the past year. Apple stock just posted its best monthly performance since the launching of iPhone in 2007.

    The rise of the Nasdaq 100 index under the pandemic may seems a bit absurd, but it is still possible to make a reasonable explanation for this, The current situation is completely different from the dot-com bubble at 2000, and the main difference is the interest rate mechanism and the Fed's generous monetary policy.

    Comparing corporate profits to bond yields is a traditional valuation method, and the Fed's move to keep interest rates near zero makes the Nasdaq 100 look cheap, which is nearly four times lower than its average over the past 20 years. As the U.S. economic outlook remains unpredictable, tech stocks would be benefitted from the further extension of the work-from-home period or an economic slowdown.

    "Given that we all know that there will be no change in interest rates for a longer period, the attractiveness of these high-growth stocks has naturally increased immediately," said Candice Bangsund, global investment portfolio manager at Fiera Capital Corp. "That's probably why these stocks are soaring."