The bears this year have been waiting for richly valued mega-cap technology stocks to fall from grace. They’re still waiting.

Tech stocks are maintaining their momentum, a sure sign that Wall Street’s confidence in economic growth remains intact and interest rate fears are muted.

Tech stocks briefly fell out of favor earlier this year as “reopening plays” muscled them aside. But this year’s rotation toward value stocks has slowed and growth is in vogue again, with Silicon Valley’s darlings leading the way.

The Federal Reserve’s (slightly) less dovish stance isn’t likely to torpedo the bull market. Warnings about high valuations are being drowned out by the mantra of TINA (There Is No Alternative). Conditions are in place for further economic growth and stock market appreciation, as underscored by Monday’s rally.

On Monday, the Dow Jones Industrial Average rose 215.63 points (+0.61%), the S&P 500 increased 37.86 points (+0.85%), and the tech-heavy NASDAQ jumped 227.99 points (+1.55%). The S&P 500 and NASDAQ hit new record highs. The small-cap Russell 2000 climbed 40.70 points (+1.88%).

Fueling the jump in stocks Monday was full approval from the U.S. Food and Drug Administration (FDA) of the COVID vaccine made by Pfizer (NYSE: PFE) and BioNTech (NSDQ: BNTX). The two biotech stocks spiked 2.48% and 9.58%, respectively.

In pre-market futures contracts Tuesday, all three major U.S. stock indices were trading in the green. In addition to vaccine optimism, investors are cheered by the robust second-quarter earnings season. To date, more than 90% of S&P 500 companies have reported Q2 operating results, for a blended year-over-year earnings growth rate of roughly 95%, according to FactSet.

Bulls, bears, and chumps…

Betting against big tech in 2021 has been a chump’s game. Indeed, the stock market bears this year have constituted the “dumb money.” Just as wrong (and just as tiresome) have been the alarmists about hyperinflation. And with the collapse of the Afghan government, every yakker on cable TV is suddenly an expert on foreign policy. As a contrarian, I always look askance at conventional wisdom.

The herd mentality this year has habitually characterized mega-cap technology stocks as overvalued and ripe for comeuppance. However, despite a few bouts of volatility and some modest pullbacks, these stocks have remained in the ascendancy.

Big tech crushed expectations for Q2 earnings and they’re expected to continue posting robust operating results for Q3 and Q4.

Read This Story: Investing in a Post-COVID World

Fueling the tech sector’s prosperity is continual innovation, not just in work-at-home digital capabilities but also in renewable energy, health services, virtual/augmented reality, robotics, artificial intelligence, autonomous vehicles, orbital satellites, and the Internet of Things. Facilitating these tech wonders is the global roll-out of ultra-speedy 5G wireless technology.

COVID has been a tailwind for technology stocks. The changes in consumer behavior wrought by the pandemic will continue to lift tech demand far into the future. New fiscal stimulus, in the form of President Biden’s infrastructure bill (which is likely to eventually pass) should add impetus to the sector’s rise.

The NASDAQ 100 vs. the S&P 500…

The NASDAQ 100 is a basket of the 100 largest, most actively traded U.S companies listed on the NASDAQ. In order of weighting, the top five holdings are Apple (NSDQ: AAPL), Microsoft (NSDQ: MSFT), Amazon (NSDQ: AMZN), Alphabet (NSDQ: GOOG), and Facebook (NSDQ: FB).

The entire quintet saw earnings soar in the quarter ending June 30, as they profited from COVID’s boost to online advertising, e-commerce, and consumer spending. There were few signs of weakness in big tech’s Q2 results (see chart).

The NASDAQ 100 year to date has risen 18.8%, compared to a gain of 18.3% for the S&P 500. Over the past three months, the NASDAQ 100 has jumped 14.2%, compared to 6.9% for the S&P 500.

The five tech giants at the top of the NASDAQ 100 also dominate the S&P 500 index, roughly accounting for a combined 23% of the broader index’s value. And therein lays a risk, of course. If the tech leaders stumble, their fall would disproportionately weigh on the rest of the market.

However, I expect the stock market rally in the second half of 2021 to not only prevail but also show broader shoulders. As the economic recovery accelerates, sectors and asset classes that have lagged are likely to pick up the pace.

Specifically, the rally already has broadened to include small-cap and international stocks, as well as economically sensitive cyclical sectors. You should increase your exposure to these areas, to maintain a well-diversified portfolio.

As of this writing Tuesday morning (before the opening bell), the S&P 500 index stood at 4,479.53. According to a forecast this month from Goldman Sachs (NYSE: GS), the S&P 500 is likely to finish 2021 at 4,700, which would represent a further gain from now until year-end of 5%.

Information in front…

According to the U.S. Census Bureau’s latest Quarterly Services Report, released August 19, the U.S. services sector continued its recovery in the second quarter of 2021.

As the following Statista chart shows, information technology led the way:

The services sector is, by far, the biggest contributor to U.S. gross domestic product, accounting for about 70% of GDP. Lagging industries are likely to make up ground in future quarters amid the strong overall recovery.

Tapering vs. tightening…

As the Federal Reserve gets ready for its Jackson Hole confab starting Thursday, it’s worth remembering that there’s a big difference between tapering and the end of quantitative easing (QE).

The Fed has been hinting that it might soon start tapering (i.e., reducing) its asset purchases, but the cessation of those purchases (i.e., the end of QE) and a concomitant hike in interest rates are still pretty far down the road. A rate hike probably won’t occur until 2023.

Regardless, the overall stance of the U.S. central bank is likely to remain accommodative, a context that has shored up the rally this year despite a series of shocks such as COVID Delta and Kabul’s collapse.

In 2021 so far, we’ve witnessed two 4% pullbacks, with stocks bouncing back to all-time highs in an average of 13 days. When it comes to inherently strong stocks, “buy-on-the-dip” should be your general stance.

The golden path…

That said, brace yourself for short-term volatility and additional pullbacks. The daily barrage of grim news from Afghanistan and spikes in COVID cases should keep you on your toes.

A major beneficiary of uncertainty is gold. In the coming months, there’s huge potential for gold investors to profit.

Goldman Sachs currently forecasts that the price of gold will reach $2,300 an ounce in 2021. As of this writing, gold hovered at $1,805/oz. If the hard asset analysts at Goldman Sachs are right (and they usually are), gold prices are on track to gain nearly 28% before the year is out.

You can increase your exposure to the “yellow metal” via gold mining stocks, funds, or physical bullion; the strategy you choose depends on your investment profile. Want to profit from the coming windfall in gold? Follow this link.

John Persinos is the editorial director of Investing Daily. Send your questions or comments to mailbag@investingdaily.com. To subscribe to John’s video channel, click here.