The tech stock rout: what the experts think
Brutal April, dot-bust redux and a re-balancing act
Brutal April
Boris Johnson has reportedly joined “a final push” to persuade the Cambridge-based chip designer Arm to list in London. The seller, SoftBank, has a strong preference for New York, the default destination for Big Tech listings. But nowhere is safe these days, said Laurence Fletcher in the FT. High-growth tech stocks have officially “entered a bear market” – defined as a 20% or more fall from a recent high – ending “one of the most lucrative trades of recent years”. The MSCI World Growth Index has fallen 22% since its November high, and “April has been particularly brutal”. Among the big casualties are Cathie Wood’s Ark Innovation fund, a former “poster child” of tech investment, which has lost 48% this year. The most gung-ho UK investor, Scottish Mortgage Trust, is down 34%.
Dot-bust redux?
“It’s now dawning on people that there’s more to investing than handing out capital like lollipops at a school fete to anyone with an idea for flying taxis or carbon-free hotdogs,” said Barry Norris of Argonaut Capital. Indeed, there’s a feeling that we’ve been here before, said David Brenchley in The Times. The dot com bubble, which began to burst in 2000, took two years to fully deflate. Are we already in the middle of a similar crash? Some of the biggest fallers – such as tech-related lockdown winners like Zoom, Peloton and Moderna – have lost 65-85% of their value since their most recent highs. Even the NYSE Fang+ Index, which tracks the biggest tech shares, is down 27% this year, after recent steep declines at Netflix and Amazon.
Re-balancing act
Of course, as Richard Hunter of Interactive Investor points out, investors ignore established tech giants at their peril. Many have “dominant, and in some cases, unassailable, positions in their market…They are prime examples of what Warren Buffett would describe as having a ‘moat’ around the business,” he told The Times. Indeed, David Coombs of Rathbone suggests this could be the chance to build the tech portfolio “you have always wanted”. More cautious voices urge “rebalancing”. If you decide to stick with tech, said Laith Khalaf of AJ Bell, give yourself “a buffer against recession” with some “old economy stocks” that pay resilient dividends too.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Create an account with the same email registered to your subscription to unlock access.
-
Indie film's 'very brief' use of AI sparks backlash and calls for boycotts
Talking Points Did the creators of a new horror movie make a deal with the artificial intelligence devil?
By Rafi Schwartz, The Week US Published
-
Could Taylor Swift swing the election?
Today's Big Question The pop star has outsized influence — and that extends beyond the music industry
By Anya Jaremko-Greenwold Published
-
Kevin Hart awarded Mark Twain Prize
Speed Read He is the 25th recipient of the prestigious comedy prize
By Peter Weber, The Week US Published
-
Japan is no longer the world's third-biggest economy despite its stock market peaking
Talking Point The country was overtaken by Germany after unexpectedly entering a recession
By Justin Klawans, The Week US Published
-
How the world economy learned to live with the drama
Under the Radar As economists predict a 'soft landing' after recent crises, is the global economy now 'oblivious to the new world disorder'?
By Elliott Goat, The Week UK Published
-
Shein: could the year’s mega-IPO fall apart at the seams?
Talking Point Latest hitch is a pre-float 'security review' that could deter potential investors
By The Week UK Published
-
Labor market strong as inflation sinks
Feature And more of the week's best financial insight
By The Week US Published
-
Midair blowout: another black mark for Boeing
Feature This isn't the first production issue Boeing has encountered
By The Week US Published
-
Behemoths of the seas
The Explainer Cruise liners keep getting bigger, with the world’s largest 'megaship' ever built set to make its maiden voyage this month.
By The Week Staff Published
-
Holiday season: Fed optimism cheers investors
Feature The feds believe their 'pivot' will make a recession unlikely
By The Week US Published
-
Older workers stay in the labor force
Feature And more of the week's best financial insight
By The Week Staff Published