Technology shares have carried the share market out of COVID-19 misery both in Australia and the US.
Investor darlings include Australia's Afterpay Ltd (ASX: APT), which has rocketed more than 750% since March, and Tesla Inc (NASDAQ: TSLA), which surged 400% before a correction the last few days.
The Nasdaq Composite Index (NASDAQ: .IXIC) itself rose 75% since the COVID-19 trough before settling down a bit this month.
So naturally the big question on everyone's mind is: When will the rally stop?
No expert, let alone an amateur punter, has a crystal ball.
But one fund manager reckons he has a sure-fire signal that will indicate when fortunes have peaked.
"The biggest risk… for the tech sector is when interest rates increase," said Wilson Asset Management lead portfolio manager Oscar Oberg.
"If you see that, that's a sign to get out of that space."
Oberg told an investor call that what's happened to tech stocks the last 6 months is not sustainable.
"You can't just look at companies like Afterpay, which went from $8 to $90, and think that's the new normal."
Calling the 'end of tech'
Wilson has been incorrectly "calling the end of the tech market for the last 3 years", admitted Oberg.
Its flagship listed investment company (LIC) WAM Capital Limited (ASX: WAM) even reduced its exposure to tech this year from about 10% to 6%.
"The reason we have been wrong is purely because of where interest rates are," Oberg said.
"Interest rates, as we all know, are at record lows. That increases valuations and that's why we've seen this momentum in companies like Tesla and Salesforce."
Wilson Asset Manager founder and chair Geoff Wilson said the current situation reminded him of the tech bubble in the late 1990s.
"I've been thinking back to 1999–2000 when we had the 'tech wreck'," Wilson told investors.
"There wasn't a specific event that created the tech wreck… It was just over-evaluations, then heat coming out of the market."
Wilson forecast that current tech investors would have to prepare for a "reasonable-sized adjustment".
Wilson Asset Management operates 6 LIC products, with more than $3 billion under management.
