Well, that pretty much covers… everything. Microsoft’s earnings release cited a litany of issues: unfavorable turnover, extended production shutdowns in China, a deteriorating PC market in June, reductions in advertising spending and shrinking Russian operations. He left out frogs, boils, locusts, lice, and hail, so the press release doesn’t quite rise to the level of biblical disasters, but you get the idea. It was quite a long list considering the EPS and lost revenue. Cloud growth slowed and video game sales were also weaker. And the stock still went up. Wedbush analyst Dan Ives says: “Ultimately, when the onion was taken out of the results, the most important core business, cloud and commercial bookings, was relatively solid despite the fears.” Here’s the point: A lot of bad news already has a price on Microsoft. Same with Alphabet, also an EPS and revenue loss, with revenue growth the slowest in two years. Tech gains: It’s already a bear market. This is the key to understanding the overnight tech bounce. With the exception of Apple, the five largest stocks in the S&P (all tech stocks if you count Tesla as a tech stock), as well as Meta and NVIDIA, have underperformed the S&P 500 year-to-date: the S&P P 500: Largest Tech Stocks (YTD) Apple -15% Microsoft -25% Amazon -31% Alphabet -27% Tesla -30% Meta -52% NVIDIA -43% The average drop for these seven stocks has been 31 % this year. Collectively, these stocks account for more than 30% of the S&P’s market cap, and yet the S&P is only down 17%. How is it possible that the S&P 500 is only down 17% when 7 of the largest stocks are down 31%? Because healthcare, especially pharma, has broken: Health Care by 2022 UnitedHealth +6% Johnson & Johnson +2% Ely Lilly +20% Merck +19% And so have the few energy stocks that still matter (the S & Johnson). P is weighted market cap, remember): Energy in 2022 Exxon Mobil +46% Chevron +25% ConocoPhillips +25% Occidental Petroleum +128% And because some Consumer Staples companies have done well too: Consumer Staples in 2022 Hershey +12% Kellogg +12% Campbell Soup +12% Coca-Cola +8% That’s it. Aside from a handful of utilities and a few steel stocks, I’d be hard-pressed to name another sector that was in the green. Of course, just because technology has been in a bear market doesn’t mean it can’t go deeper into a hole. But there is a difference between a technological recession and a nuclear winter. Are we really anticipating a nuclear winter in technology? It looks like a stretch. Some of these falls have been truly impressive. NVIDIA has halved since hitting an all-time high last November. Its forward P/E ratio has gone from 68 in January to 31 today. That doesn’t mean we can’t go lower in the next couple of months. But a reasonable position would argue that if you look six months ahead, there are more potential upsides in top-quality names than downsides.