Tech rally shows troubling parallels to dot-com bubble, warns long-time bull

Institutional Investor hall of famer Richard Bernstein believes too many tech investors are getting dangerously caught up in what could turn into another dot-com bust.

According to Bernstein, emotions among individual investors are running too high and diverging from fundamentals.

"We're at a point in the technology cycle where investors are starting to become pure momentum investors," the CEO of Richard Bernstein Advisors said Wednesday on CNBC's "Trading Nation." "You have this notion where people believe that tech is no longer cyclical. It's something new. It's something different. And, that's sounding a bit like March 2000."

The dot-com bubble's demise began March 11, 2000. By Oct. 9, 2002, the tech-heavy Nasdaq lost almost 80 percent of its value.

Bernstein, a CNBC contributor and long-time bull, isn't concerned about runaway valuations creating another epic crash in the tech sector. Rather, he's worried investors are setting themselves up for disappointment by using a flawed way of thinking as an earnings slowdown grips Wall Street.

"As profits decelerate, which most people are in agreement is going to happen this year, tech is generally one of the worst performing sectors," he said.

Bernstein is attacking the slowdown proactively. In early January, he cut his tech exposure by more than half. Some may question the timing of the move. The Nasdaq is up more than 15 percent this year.

However, he's standing by his strategy.

"Whenever profits decelerate, the most important factor in a portfolio is quality and stability," Bernstein said.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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