Wall Street’s Reluctance to Doubt Tech Stocks
As we enter 2025, one thing is clear: technology stocks continue to drive Wall Street’s growth. Despite a contrarian bet against tech stocks made by Steven Jon Kaplan, chief executive of the True Contrarian blog and newsletter, earlier this year, he remains steadfast in his prediction. Kaplan’s successful track record, which includes advising investors to buy during the 2020 pandemic selloff and correctly calling tech selloffs in recent years, lends credibility to his claims.
A Bigger Bubble Ahead?
Kaplan believes that the current tech bubble is even larger than before, and he’s sticking to his prediction that the QQQ, an exchange-traded fund that tracks the Nasdaq-100, will drop to 300 within a year and below 100 within three years. This would represent a 50% drop from its current level. Kaplan cites overpriced expectations for company profits and the lack of tangible returns from big tech companies’ AI spending as reasons for his skepticism.
Hedge Funds and Insider Selling
Kaplan notes that hedge funds, which make up a significant portion of daily tech stock volume, are likely to start selling if the QQQ drops to 360. He also points to the record level of insider selling seen this year, particularly among big tech companies like Nvidia, Microsoft, Apple, and others. This selling, Kaplan believes, could be the catalyst for a larger market correction.
Where to Put Your Money
So, where is Kaplan investing his money? He’s betting on the perceived “boring investment” – the iShares 20+ Year Treasury Bond ETF (TLT), which has fallen from $180 in March 2020 to around $87 currently. Kaplan expects a big move into TLT won’t happen until investors start seeing losses from the stock market. He’s also investing in palladium via the Aberdeen Physical Palladium Shares ETF (PALL), as big hedge funds have been shorting the metal.
The Bear Market Ahead
Kaplan believes the current bear market may have already started, and he’s mapping it out. He tracks the current bull market from March 2009, with prior bull runs from October 1990 to March 2000, and August 1921 to September 1929. Subsequent bear markets were 31 and 34 months long, respectively, so he estimates the next bear market will bottom in the second half of 2027, kicking off another strong bull run.
What’s Next?
Kaplan predicts a bounce in the market, possibly next summer, followed by another drop. He advises investors to look beyond big tech stocks and focus on winners from 2002 to 2007, such as emerging markets, gold mining shares, commodity producers, and small and mid-caps. As the market corrects, Kaplan believes these investments will shine due to negative memories by investors.
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