The stock market is recording a bad year of 2022, after the tremendous benefits of this epidemic.
Investors face losses, even those who place bets on securities, such as technology companies, which have had years of prosperity, so for.
In the heart of Manhattan, surrounded by Times Square lights and electronic billboards, is the Nasdaq, a stock exchange that specializes in technology companies.
In the first five months of the year, the Nasdaq index – which reflects the volatility of the set of shares traded on this stock exchange – fell by about 23%.
“This is one of the worst falls in the history of the Nasdaq,” notes Eduardo Carbagel, a professor of economics and finance at the Monterey Technological Institute in Mexico.
And the so-called “big tech” – such as Meta (Facebook’s parent), Amazon, Netflix, Apple and Alphabet (Google’s parent) – has not escaped, falling by more than double-digit percentage.
Why Tech Companies Going Down in Stock Market?
Markets are volatile. The mood of investors, what they expect to happen in the future, is what determines the price of shares in the stock market.
And this year, the trend has been to get rid of these assets because they think they will not get the expected return.
“My guess is that a lot of the technology companies were worth more,” says Carbazel.
“It’s impossible for Tesla to have more market value than any company that has historically manufactured cars,” he added.
There are many factors that affect the current spirit of investors.
The first is high inflation, which is a widespread trend in the Western world this year. In the United States, for example, annual numbers in June were 8.6 percent, the highest in 40 years.
Inflation brings uncertainty, a dirty word for markets.
In an effort to stem the tide of inflation, the central bank is raising interest rates, a move that makes money and makes credit more expensive.
In Washington, the Federal Reserve has decided to raise rates, and its indications are that it will continue to do so.
This has a significant impact on companies that have billed in recent years, taking advantage of very low interest rates.
“When expectations change and interest rates rise, these stocks are generally more affected than those companies whose indicators carry more relative weight, such as the Dow Jones, more traditional companies,” Nichols said. Max, director of Criteria East, tells BBC Mando. In Argentina
The rise in the cost of credit has also made investing in US Treasury bonds more attractive, which is why some of the capital goes to these types of assets, which are more secure.
This, in turn, cools the economy and lowers companies’ earnings expectations, making their stocks less attractive.
Together, these two factors create an economic bomb called a flash of stagnation: a stagnation of activity with a steady rise in prices.
“The intensity of the decline is based on the stocks that dominate the Nasdaq with the most weight,” Max said.
The tech giants – called Big Tech in English – are Facebook, Apple, Amazon, Netflix and Google, a group of companies called FAANG.
Although a more traditional one is also included in the big ones: Microsoft.
“In the first half of the year, we saw a slight decline in profits, compared to expectations, in the highly representative stocks in technology indexes such as Facebook, PayPal and Netflix,” says Max.
According to the New York Times, Facebook, Apple, Amazon, Microsoft and Google alone lost 2.7 trillion in market value from the beginning of 2022 to May 19.
That’s more than the combined economies of Brazil and Mexico.
“They’re probably returning to the real levels that should be in share prices,” Carbazel said.
And the pulling power that big companies always keep an eye on small companies, which falls like dominoes.