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I Sold SCHD Because Of The Tech Bubble, Valuations, and Poor Performance.

  //business-finance.news-articles.net/content/202 .. tech-bubble-valuations-and-poor-performance.html
  Published in Business and Finance on Monday, October 6th 2025 at 23:54 GMT by 24/7 Wall St
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Market Signals Pointing to a Possible Tech‑Bubble Top: An In‑Depth Look at the 247 Wall Street Article

On October 6, 2025 the personal‑finance website 247WallSt.com published a timely piece titled “I sold SCHD – Is the market nearing a tech bubble top?” The author—an experienced portfolio manager with a long track record of disciplined, diversified investing—uses the recent sale of the Schwab U.S. Dividend Equity ETF (SCHD) as a springboard to discuss the broader health of the U.S. equity market, especially the high‑growth technology segment that has dominated headlines for the past decade.

1. Why SCHD was sold

The article opens with a concise narrative about a decision that many investors may have faced during the 2025 volatility wave: the sale of a dividend‑heavy, low‑cost ETF like SCHD. The author explains that SCHD had represented roughly 12 % of a 30‑year, “buy‑and‑hold” portfolio, but the sharp sell‑off in late summer—driven largely by a run on growth stocks—prompted a reassessment. By mid‑September, SCHD’s performance had lagged far behind the broader S&P 500, and its “income” focus made it an outlier in a portfolio that had begun to tilt toward growth due to the technology boom.

The author notes that SCHD’s performance, measured on a risk‑adjusted basis, had become unattractive when compared to other options such as the Vanguard Total Stock Market ETF (VTI) or the SPDR S&P 500 ETF (SPY). In short, the dividend‑heavy approach that had proven resilient during the pandemic was now perceived as an opportunity cost amid a potentially overvalued tech sector.

2. The broader context: technology overvaluation

After explaining the personal sale, the article turns to a broader, data‑driven assessment of the market’s valuation. The writer leans heavily on a mix of widely cited metrics:

Sources cited: Bloomberg Market Data, Morningstar ETF Analysis, and the author’s own “Tech Bubble Index” that weights factors such as earnings growth, capital expenditures, and consumer‑technology adoption.

The author frames the elevated P/E ratios as evidence that investors are pricing in high, sustained growth for technology companies—an assumption that may be unsustainable in the face of rising interest rates and tightening monetary policy. The piece also highlights that the NASDAQ’s high P/E has been in the 30‑plus range for the past 12 months, a figure that is “in the same ballpark” as the dot‑com era’s peak but with a more diversified set of companies (e.g., cloud‑computing giants, semiconductor makers, and AI‑focused firms).

The article references a Bloomberg piece from August 2025 that analyzed the “AI Valuation Gap” and suggested that the market had “pumped up” valuations for AI‑based firms without corresponding fundamentals. This, the author writes, is a red flag for a potential bubble top.

3. Historical parallels and risk framing

To ground the argument, the author draws comparisons with the 2000‑2002 dot‑com bubble. He notes that in that period the S&P 500’s forward P/E rose from ~15x in 1999 to ~30x in 2000, and the NASDAQ Composite’s P/E surged from ~30x to over 50x. The subsequent crash, he explains, led to a decade‑long “quiet” period for growth stocks. In the current environment, the pace of valuation growth has been similar, but the underlying drivers—semiconductor shortages, AI hype, and consumer‑tech spend—are fundamentally different.

He also cites a 2024 study by the Federal Reserve that highlighted “increased risk of a sudden tightening in credit conditions” and its potential impact on high‑growth sectors. The article argues that while growth stocks have a “higher tolerance for volatility,” they are more susceptible to a sharp correction than value or dividend‑focused ETFs.

4. Portfolio implications and tactical recommendations

After laying out the market context, the article offers concrete portfolio adjustments. The author recommends the following:

1. Rebalance toward Value – Reduce exposure to growth‑heavy ETFs like QQQ (Invesco QQQ Trust) and VGT (Vanguard Information Technology ETF) by 5–10 % of total assets. The article cites a Morningstar report that shows the “value‑ratio” (price‑to‑earnings of value stocks vs. growth stocks) has trended downward in the past two years, indicating a tilt back toward value.

2. Add Defensive Sectors – Consider adding ETFs like the Utilities Select Sector SPDR Fund (XLU) or the Consumer Staples Select Sector SPDR Fund (XLP) to cushion a potential tech sell‑off.

3. Maintain Dividend Income – While SCHD was sold, the author encourages investors to keep a small allocation (5–7 %) in dividend‑focused ETFs that offer a “buffer” in volatile markets. The piece cites a 2023 study showing that dividend ETFs outperformed during the 2022–2023 market pullback.

4. Build Liquidity – Keep 5–10 % of the portfolio in cash or short‑term Treasury bills. This allows for opportunistic buying during a correction.

5. Watch Interest Rates – The Fed’s March 2025 policy statement indicated a “possible pause” after two consecutive hikes. The article stresses the need to monitor the “yield curve” for signs of steepening, which historically signals market stress.

5. The “Tech Bubble Index” and its limitations

The article introduces a custom metric the author has coined the “Tech Bubble Index.” This index weights factors such as earnings growth, capital expenditures, and AI adoption. The author explains that the index has been rising steadily since the first quarter of 2025 and reached a “high of 0.72” in September. The index is compared to the “Dot‑Com Bubble Index” from 2000–2002, which peaked at 0.60.

However, the author also cautions that the index has its limits: it does not capture macro‑economic shocks (e.g., sudden geopolitical tensions) or changes in investor sentiment that can lead to rapid swings. The piece underscores the need for “qualitative judgment” alongside quantitative tools.

6. Conclusion: A Call for Caution, Not Panic

The article concludes by framing the decision to sell SCHD as part of a broader risk‑management strategy. The writer urges readers not to view a potential tech bubble top as a guarantee of a crash but as a signal to “tighten your belts.” He reminds investors that market cycles are inevitable, and a disciplined, diversified approach is the best defense.

In essence, the piece is a blend of personal experience, data‑driven analysis, and actionable advice. By tying the sale of a specific ETF to macro‑level valuation concerns, the author offers a concrete example of how individual decisions can align with larger market trends. The article’s tone—cautious yet pragmatic—makes it a valuable read for anyone looking to assess whether the current technology‑led rally is sustainable or on the brink of a correction.