The 100-day rally in tech stocks is more similar to the 2009 recovery than it is to the 1999 bubble, DataTrek says

• The more than 50% rally in technology stocks over the past 100 trading days ends one of two ways: higher like the 2009 recovery, or lower like the 1999 dot-com bubble.
• That's according to DataTrek, who said on Wednesday that tech stocks' historic 100-day rally will likely follow the footsteps of the 2009 recovery and continue to move higher.
• "At the end of the day, 2020 is an early cycle year (more like 2009) rather than a late cycle one (like 2000)," DataTrek said.
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Technology stocks have enjoyed their strongest 100-day rally in more than two decades, and where they go from here will mirror either the 1999 dot-com bubble (lower), or the 2009 recovery from the Great Recession (higher).

That's according to DataTrek co-founder Nicholas Colas, who said in a note on Wednesday that in a 100-day trading period from their March 23 low, technology stocks rallied 62%.

That exceeds the 100-day rally of 50% in July 2009, and the 100-day rally of 53% in March 2000.

"Tech only returns +50% over 100 days in a bubble or a cyclical recovery," Colas explained.

Where technology stocks go from here will likely follow the path of a cyclical recovery as in July 2009, rather than a deflation of a tech bubble as in 1999, according to the note.

In July 2009, tech stocks went on to trade 4% higher in the ensuing three months, and 11% higher one year later, Colas said.

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The difference between today and the 1999 dot-com era bubble is that large cap technology stocks have fundamentals that are "ferociously strong," even while the US experiences the sharpest economic decline since the Great Depression, DataTrek said.

Based on Google Search trends showing sustained sky-high activity for words like "laptop," Colas estimates that "we're at never-before-seen levels of worldwide demand for portable computing," according to the note.

However, technology investors will be met with tough comparisons in 2021 and 2022 after a "once-in-a-generation" banner year in 2020, especially when a COVID-19 vaccine is available.

"Demand could well decline for several years or, best case, stagnate," DataTrek said, and given that markets are forward looking, investors should expect continued volatility in the sector as 2021 approaches.

But in the long term, once COVID-19 is a memory, the technology sector will return from the "work-from-home" theme and be what it always has been: "a cyclical group with upside from human ingenuity," the note said.

"At the end of the day, 2020 is an early cycle year (more like 2009) rather than a late cycle one (like 2000)," DataTrek concluded.

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