Sorry investors: You blew it. Tech stocks just endured a slump that, on reflection, looks like it was the right opportunity to “buy the dip.” Nvidia, Meta and other tech stocks are rallying this week, and it appears to be too late to reap the benefits of a probability to purchase shares at a reduction.
Yet while this episode may feel like a missed opportunity, the reality is that investors are almost all the time higher off not attempting to purchase the dip — and even paying much attention to the market’s short-term ups and downs.
After soaring in early 2024, tech stocks posted a lack of nearly -8% from July 1 to July 30 as investors locked in gains and rotated money into small cap firms and interest rate-sensitive sectors in expectation of a rate cut from the Federal Reserve.
Amongst momentum traders trying to time the market, there was loads of chatter about the potential of buying the dip through the last week of July. Now it appears as if this chance has already passed.
The tech sector gained 6.44% from July 30 to July 31, with Big Tech names posting outsized gains and once more proving the sector’s inherent volatility will not be indicative of a looming market correction, overvaluation or underlying weakness.
Tech stocks bounce back on strong earnings
Tech kicked off its earnings season the ultimate week of July, with a handful of firms announcing strong revenues, earnings and forward guidance:
- After falling -7.38% between July 16 and July 26, Apple reversed its downtrend by gaining 2.16% over the past five days. The corporate reports earnings after market close on August 1.
- Meta Platforms have surged 10.12% since July 31 after announcing the it beat earnings by 8.11%. This comes after the stock fell -16% between July 5 and July 25.
- Nvidia, whose shares slid -23.49% from their year-to-date high on June 18 before bottoming, are up 4.27% since July 31.
- Nvidia competitor Advanced Micro Devices saw its stock jump 3.70% since July 30 on the back of quarterly earnings and revenue beats of 1.26% and 1.99%, respectively.
Other Magnificent Seven tech stocks are doing well, too. Google-parent company Alphabet beat earnings expectations by 2.41% when it announced on July 30. Shares are up 3.55% over the past five days.
It’s the same story for Amazon, which broadcasts earnings after the close on August 1. Shares of the e-commerce giant are down -4.59% over the past month,however the stock has risen 4.24% over the past five days.
Time available in the market beats timing the market
On reflection, it looks like buying the dip in tech stocks per week or so ago would have been a lucrative move. But whatever the apparent reversal occurring within the tech sector, attempting to time the market will not be advisable. Volatility is more pronounced within the short term, and investors with long-term horizons usually tend to profit from holding their positions.
In other words, it’s often smart to disregard the market’s day-to-day news and do nothing along with your portfolio.
In response to Hartford Funds, investors who missed the market’s 10 best days over the past 30 years would have seen their returns cut by 50%, while those that missed the very best 30 days previously 30 years would have seen their returns reduced by 83%.
Unless you own a crystal ball, attempting to time the market — and buy the dip — is less complicated said than done. For tech investors who held their positions through the sector’s most up-to-date selloff, second-quarter earnings are proving the value of their buy-and-hold strategy.
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