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Is the US stock market heading for a crash like the DotCom bubble in 2000?

20 February 2020 7:57 PM

The US market has a big impact on all markets and when they get flu, South Africa sneezes.

When you've worked all your life and now need to put away your hard-earned savings to work for you, where do you invest?

How do you know which fund manager or financial planner is best?

South African investors are also at the moment scared of American tech shares, worrying that the dotcom bubble may burst.

Over 5 years, the USA stock market went up 15% per year – i.e. it doubled in value.

Concern that tech shares are too expensive and they are too big for the US stock market – Facebook, Apple, Amazon, Microsoft, Alphabet (5 shares) account for 20% of the value of the US market. These five big companies are trading at 30 times their expected earnings.

By comparison in the year 2000, the five biggest shares made up 18% of the USA market & they traded at 47 times expected earnings. For interest, the biggest 5 companies in 2000 were Microsoft, Cisco, GE, Intel and Exxon.

Big differences are that valuations are expensive now but not nearly as expensive as Y2K

Expectations from investors are very different. They are more worried that companies won’t carry on growing.

In Y2K investors thought the ride would never end so the collapse in markets was shocking. Generally, markets don’t crash when everyone is worried, they crash when things are going brilliantly!

I don't know of a website comparing financial advisers. But shop around. Even if you have no idea, by the time you've been through a few advisers you'll be better able to sift them. The person should be able to explain things to you in plain language, not talking too quickly, that's a good start.

Warren Ingram, financial adviser, wealth planner

Investors are scared of the American market, that the dot-com bubble may burst. When the US struggles it has a big impact on South Africa. We cannot make forecasts. We can only compare the year 2000 and the situation now.

Warren Ingram, financial adviser, wealth planner
Picture: Freeimages.com

For more on how to make sense of American tech stocks and where to invest your money, here is the full interview with Warren Ingram below.

Get the 10 most-read articles of the week from Bruce Whitfield’s The Money Show, emailed to you every Friday morning.


20 February 2020 7:57 PM

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