Half a year ago we said that the semiconductors sector prepares multi-decade breakout in 2019. This week we see ‘it’ is happening. No coincidence 2 out of our 5 top stocks with their forecasts for 2019 are in the semiconductors stocks space. Today, 20 years after the dotcom bubble burst and semiconductor stocks peaked, we see an attempt to break higher! Given the setup of our 15 global leading indicators we believe there is a fair chance of semis to move seriously higher from here.
The dotcom bubble was characterized by an unusual high number of tech stocks rising at irrational heights. Most of those tech stocks died, some of them survived and only a few of them thrived.
This boom-and-bust cycle is reflected in the the chart of the Nasdaq but also the one of semiconductors.
Below is the multi-decade semiconductors chart represented by the DJUSSC index.
What stands out here is the breath-taking crash until 2009, but also the amazing recovery as of 2013.
Moreover, fast forward to today, the observation that stands out is the index trading at all-time highs, just 1% above the dotcom highs.
This is the 2nd attempt for the semiconductors stock market segment to break out, the previous attempt last year eventually failed.
Why may this time be different? Because of the risk friendly environment of global stock markets. As explained in our piece Leading Indicator: The Message Of The Euro currently there is a risk-on investing climate. This favors high risk stock sectors like tech stocks.
We are in uncharted territory with semiconductor stocks. It is pretty challenging to do a forecast of where this sector is headed. However, it is reasonable to think that there some 30% upside potential in specific semiconductor stocks. Time will tell, and we will closely follow this sector!