The Nasdaq 100 And The Ongoing Capex Recession

Per the post yesterday regarding technology and the capex recession, attached is a chart of the Nasdaq 100. The majority of the Nasdaq 100 are technology stocks of one form or another. Many of the largest weighted components are capex intensive technology companies such as Microsoft, Intel and Oracle. Companies which benefitted from the IT innovation explosion in the 1990s. CRM, ERP, MRP, e-commerce, supply chain optimization, transportation, logistics, business intelligence, target marketing, merchandise management, human resources, decision support, distance learning, networking & security and on and on and on.

Overlaid on the chart is buying pressure. The rally in 2003 was from an extremely oversold 85% correction post 2000. Obviously a reflex rally rather than a sign the business recovery had begun. Since 2003, would you have wanted to own these innovators? Does anyone really believe smart money is going to start buying technology when they've shunned it for six years? Why have they shunned it? We are in a capex recession, depression or whatever you want to call it. Capex spending by some measures has been down double digits for many years. Are we finally near a recovery? No. To the contrary, IT related capex spending has unexpectedly fallen off of a cliff. Will the central bankers work magic and start a fresh cycle of capex investment? That would truly be magic.

At some point we will start a cycle of renewed capex spending and a resurgent technology sector. The question is when will that cycle begin.