Tech shares dive

As you might have noticed, I've been away for the week on grandson adoration duties in Australia. I had intended to do my roundup of tech share performance in October before I left. I would have painted a very positive picture (as you can see below) with NASDAQ continuing to storm ahead by another 5.9% - making a 18% gain for the year. In the UK, the Techmark 100 was up a similarly impressive 4.4% in Oct with mobile - up 7.21% - once again the 'star'.

So I went on my week's break thinking that tech really was that "safe haven in a storm" that I had commented about so many times this year.

But the last week has been horrid for tech. NASDAQ has lost 6.53% (closing Friday at 2627). Techmark 100 was also hit - closing 4.4% lower on the week with UK SCS stocks taking the brunt - down 6.3%.

If there was one 'event' which triggered all this it was John Chambers (the CEO of Cisco) warning of "dramatic year-on-year decreases" in orders from financial institutions, retailers and auto makers. This really spooked the market. Tech has done so well this year and many believed that consumer tech, in particular, would continue to do well even if the general economy did not. Cisco - considered by many to be a bellwether - rather indicated that even the sexy end of tech was just as vulnerable to consumers tightening their belts as any other sector.

The knock on effect of this was dramatic. Cisco fell 12% on the week as did Apple and Oracle. RIM and Google also fell heavily. Indeed it was the 'big tech companies' that suffered most.

My view?

I have mulled over the "Tech safe haven in the storm" theme for many months in HotViews. I concluded that if the general downturn was 'mild', tech could indeed weather the storm well. It's been consumer tech - as opposed to Enterprise tech - that has powered the sector of late. The theory goes that Consumers would shun the meal out in favour of big screen home entertainment. (See "The Beer Syndrome" below) Buying an iPhone was the kind of retail therapy 'pick-me-up' that people needed in hard times. But what if the downturn is worse than 'mild'? What if you fear losing the home that houses the big screen? I emphasis the word fear as you don't actually have to lose your home to stop spending - you just have to fear you might. Supporting this was a poll out on Friday showing Consumer Confidence at a two year low.

A quick scan through the papers on my return hardly inspires confidence. Oil at $100 a barrel (I remember predictions of the 'End of the World' if it reached $50 just a few years back! The $ closing at 2.11 against the £. Banks likely to write off hundreds of billions ($500b according to the Sunday Times). Northern Rock likely to cease trading. House prices falling. NI up next April. Business confidence at lowest since 9/11 according to the IoD. Hardly inspires consumer confidence!

But, there again, the British queued in the cold for the iPhone on Friday and over 350,000 are expected to be sold here by the New Year. Last week's share price falls only put the market back to where it was as recently as September. Maybe we should wait a little longer before declaring Armageddon. But I'm still going to watch those screens with growing concern this week!