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tdp2664 InvestorPlace In the aftermath of the market plunge, many tech stocks have seen big markdowns in valuations. No doubt, investors and analysts see this as a nice opportunity. In fact, there has been a surge in upgrades. Despite all this, there still is much risk in the markets. And this is likely to be magnified with tech stocks. Actually, that's just one of my four reasons why you should be cautious on tech stocks for now. And I even have three interesting short candidates. Let's take a look: Reason #1: Economic Uncertainty It's far from clear if the global economy is headed for a recession. But there is growing evidence of a slowdown. For example, the U.S. economy has grown at a 1.3% pace for the first half of this year. Yet even if there is not a recession, there likely will be problems for tech stocks. All in all, corporations have little visibility. In other words, it's a good bet that the reflex reaction will be to cut back on information technology spending. Reason #2: The Move to Austerity While there is skepticism about the budget deal, the fact is the U.S. federal government will see some spending reductions. This also will be the case throughout Europe. Keep in mind that a big portion of IT spending comes from government expenditures. Reason #3: Consumer Pain According to the latest data, consumer confidence in the U.S. hit its lowest point since 1980. And this negativity might continue for a while — or, at least, that basically was the message from the Federal Reserve. Consumer spending is a big part of technology, as seen with things like cell phones and laptops/PCs. Reason #4: Disruptive Change With the success of companies like Facebook, Twitter and Zynga has come a huge amount of investment from venture capitalists. They are helping to create new businesses that can wreak havoc on existing tech operators. Some of the biggest trends include social networking, cloud computing and mobile applications. Next: 3 Tech Stocks to Short
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