Growth and technology stocks, as measured by the Nasdaq-100 index, have gotten more expensive and appear poised for a potential fall in the next couple weeks, according to Michael Kramer, founder of Mott Capital Management. “The Nasdaq 100 needs to reprice at lower levels to account for where real yields are,” Kramer said in a phone interview Friday. Rising real yields, which are adjusted for inflation, are particularly damaging to valuations of tech and other growth stocks.
Real rates have climbed recently, as indicated by the trading down of the iShares TIPS Bond ETF
said Kramer. Meanwhile, the earnings yield of the Invesco QQQ Trust, an exchange-traded fund tracking the Nasdaq-100 index, has come down, according to Kramer. That’s indicated by the recent rise in shares of Invesco QQQ Trust
he said. Trading of the two ETFs help inform his bearish view of the market. Invesco QQQ Trust’s recent climb has diverged from the decline seen in the iShares TIPS Bond ETF, creating a growing gap that suggests the Nasdaq-100 may be set to fall in the next couple weeks, Kramer explained. He highlighted that divergence in this chart below in his market commentary note on Sept. 8.
MOTT CAPITAL MANAGEMENT NOTE ON SEPT. 8, 2022
“You have the TIP ETF making news lows,” said Kramer. The divergence with respect to the Invesco QQQ Trust means the Nasdaq is becoming more expensive, he sai …