Tech Selloff Is Reminiscent of 1999: O’Rourke

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April 8 (Bloomberg) -- Mike O’Rourke, chief market strategist at Jonestrading, talks with Betty Liu about the tech selloff in relation to the bubble of 1999 and offers his investment strategy in the current market on Bloomberg Television’s “In The Loop.”

I want to bring in mike o'rourke.

He is a pretty big bear on u.s. stocks.

You are watching some of the tech stocks.

You say some of the trends have not roque and for the big tech bellwethers.

These names had a huge run over the past year until about a month ago.

They are in the big correction phase and a lot of names are down 20% to 30%. is a reminding you of 1999? momentum leaders then, yahoo!, amazon, qualcomm, they leapt out in january of 2000. you are seeing a trend here.

Investors rotate the bellwether names and that supports the index.

That is what has been going on.

That means they will exit those bellwethers and we will?

See a bigger meltdown ? i think a meltdown is a strong word.

We had a meltdown in 2000. were melted down at the end of the year.

It is one of those things where it is not healthy action for investors.

It is something to be aware of.

Investors are becoming more cautious.

Those leaders who have been leading the market, their trends are broken.

You do not like any sector.

You want to play defensive.

You do not like health care.

I do not.

It is a great example of what has been going on in the market.

Companies acquire another health care company, reincorporate overseas in ireland and they get a tax arbitrage.

That is driving gains over the past year.

They have acted like a momentum and are part of that group.

We are not talking big pharma.

Scarlet, you have a bullish take on health care stocks.

Wells fargo has shown a persistent recovery in earnings growth.

Topline growth has been a challenge, but not for the health-care companies.

In the first quarter, health-care companies rose seven percent as a group.

That is the fastest rate in the s&p 500. it is more than double the rate of the overall index.

The cell into biotech has led investors to trade up.

That is a great example.

Most companies have been buying back stocks for the past five years.

That has been driving me earnings.

There has not been a great deal of revenue growth.

The sectors are about 25% of the past year.

The stock performance is are outpaced.

You see multiple expansion.

They are getting frothy.

Relative to where they have been and where they are trading, yes.

Given your view on stocks, alex steele -- alix, who has been looking at gold over the past months, what is the case?

It has moved inversely.

It does beg the question, as stocks fall, will gold rally?

The idea for gold is it is a safe place to stash cash.

You see the inverse relationship between the two assets.

There are some worry spots for gold that are unique.

The latest increase has been driven by speculative investors.

You take a look at the physical demand from china, that has been week.

Not only do you have the depreciation of the chinese yuan , but you have low inflation and higher interest rates.

That can weigh on the gold price.

This goes back to qe.

Each phase of qe lead to the topping of the after class of choice.

During qe2, it was gold and -- and commodities.

In operation twist, it was treasury bonds.

Qe3, it has been long equities, short goals.

We have not had the inflation that the fed talk -- the feds talk about.

Ever since that fed has started tapering, that is when the equity performance started occurring.

Gold has been outperforming equity since then.

I expect that trend to continue.

We may not be reaching a peak in gold.

A lot of that was speculative.

As alix said, speculators came back to gold in the past couple of months.

The two bottoms in gold were june and december, when speculators were betting against gold.

We are seeing that unwind.

I believe that investors will come back to gold for the flight to safety reasons.

This text has been automatically generated. It may not be 100% accurate.


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