The current narrative explaining why tech stocks are getting hammered



This morning the tech-heavy Nasdaq Composite index is off 2.34% after falling yesterday. Shares of Tesla are off more than 6% today, now mired in a bear-market correction after reaching new all-time highs earlier this year. Apple stock is worth $122.02 per share, down from over its recent highs of more than $145.

After a long period of time when it felt like tech stocks only went up, the recent correction is starting to feel material.

There are other ways to measure the selloff. Bessemer’s cloud index is off 4.5% today, after falling over 5% yesterday. And the now-infamous $ARKK, or ARK Innovation ETF that many investors have used as a proxy for growthy-tech stocks, is off 6.6% today after falling 5.9% yesterday.

Hell, even bitcoin has taken a pounding in the last few days, after its recent, relentless rise.

What’s driving the rapid turn-around in the value of tech companies, tech-focused indices, and tech-adjacents, like cryptocurrencies? Not merely one thing, of course, in an environment as complex as the world’s capital markets. But there is a rising narrative that you should consider.

Namely that the money-is-cheap-and-bond-yield-is-garbage-so-everyone-is-putting-money-into-stocks trade is losing steam. As some yields rise, bonds are become more attractive bets. And as COVID-19 vaccines roll out, some investors are pushing their stock-market bets into categories other than tech.

The result is that the landscape of value is shifting; the winds that were at the back of every tech company are receding, at least for now. If the changed weather (Read more...)