TECH STOCKS CONTINUE TO LEAD THE MARKETS’ FALL

The NASDAQ, home to most U.S.-listed tech stocks, slumped 3.8 percent last week, its seventh consecutive week closing down and its longest losing streak since 2001 after the dot-com euphoria came to an end. 

Cisco’s share price tossed 13 percent last week after the company projected poor profits for this quarter. Dell was off 11 percent for the week. Tesla slid 14 percent and Twitter 6 percent.

The NASDAQ has shed 29 percent of its value from its 29 November peak of 16,057. It closed at 11,535 on 23 May, up 1.59 percent.

Tech share prices began to sag late last year when inflation refused to climb down.

At the same time, the COVID-era consumer tech boom began to fade, reducing demand for electronics and other technology as shortages of key parts, especially computer chips, crimped production.

Next, the U.S. Federal Reserve began an ongoing campaign of raising interest rates, boosting the cost of capital on which tech stocks depend.

“Interest rates are going to be higher on average than they have in the past,” managing director Ed Campbell at PGIM Quantitative Solutions said to The Wall Street Journal. “That’s an environment that’s better for value stocks,” those that trade at a lower price relative to their fundamentals.

As a result, energy stocks—which suffered through much of 2021—are up 40 percent this year. Several drug companies have risen by double digits.

A handful of stocks that have been investors’ darlings have been responsible for most of the tech sector’s collapse in value.

Alphabet (*Google’s parent), Amazon, Apple, Meta (née Facebook), Microsoft, Netflix, Nvidia, and Tesla grew so much during the COVID War that they made up 25 percent of the NASDAQ’s value.

The Standard & Poor’s 500 index ballooned 90 percent through 2019, 2020, and 2021, driven significantly by surging share prices of Alphabet, Apple, and Google.

Apple’s share price rocketed up 81 percent in 2020; Microsoft added 41 percent.

Now that same handful of tech “wonder stocks” are responsible for 46 percent of the S&P’s losses this year, the WSJ calculated.

Netflix has crashed by 70 percent, Meta 43 percent, and Nvidia 42 percent.

The other companies’ stocks have lost 23 to 36 percent in value in 2022 as of 20 May, the WSJ said.

*[earlier version corrected]

TREND FORECAST: In the October 1999 issue of the Trends Journal, (it was a quarterly newsletter back then) we had forecast that the dot-com bubble would burst by the second quarter of 2000. It began its collapse in March 2000. And, totally forgotten and mostly never known by the vast majority of the population, the Nasdaq did not hit its previous peak until nearly 15 years later. 

Considering how hyped-up the Nasdaq was as a result of the COVID War and how tech stocks skyrocketed as the New ABnormal had workers “Zooming,” schools closed down and students learning on-line, stores closed down and people shopping on-line, etc. … minus more lockdown mandates—or another wildcard that forces people to stay home—it may be a decade before the Nasdaq returns to its COVID War highs. 

TRENDPOST: U.S. tech stocks have lost a quarter of their market value this year. Portfolio managers have consistently over-weighted the sector since 2010, but that has now flipped to a net 12-percent underweight . 

Putting the decline in perspective, Bank of America’s chief strategist Michael Hartnett told the Financial Times that this is the biggest ‘short’ in tech since August 2006.