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It comes as no surprise to Trends Journal subscribers. When the COVID War was launched last year there was an unprecedented spike in stocks of businesses that benefited from the lockdowns… with tech stocks and riskier issues leading the charge. Now, with many aspects of the COVID War in place, or slowing down, these hi-flyers are losing favor as investors batten down their portfolios against higher interest rates.
When people were locked down at home, share prices for home exercise tech company Peloton rocketed up more than 400 percent; Zoom’s price rose nearly that much.
Pinterest shares gained 250 percent and Snap’s stock price tripled.
Now share prices for Beyond Meat, Peloton, Pinterest, Snap, Twitter, Zillow, and Zoom all have plunged at least 30 percent since 1 September.
In comparison, the S&P 500 index is down just 0.2 percent over the period.
Beyond Meat, Peloton, Snap, Twitter, and Zillow all reported losses in this year’s third quarter, The Wall Street Journal noted.
These and similar companies, many of which have never shown a profit, have relied on easy money and low interest rates to keep operating.
As the time nears when the U.S. Federal Reserve will raise rates and borrowing becomes more expensive, the companies lose their appeal to investors.
TREND FORECAST: Companies based on innovations will be hit hard by the prospect of higher rates. Their stock prices often are justified by projected earnings that might not be realized for years… or if ever. Higher interest rates make those future earnings worth less in calculations analysts use to figure stocks’ value. Again, the more the Fed tapers and the higher interest rates go, the deeper overvalued stocks will fall… especially the ones that have been propped up high but keep losing money.