Tech stock sell-off may be a good signal
The tech-stock-heavy Nasdaq index is down 15% since its November peak. But what’s bad for tech investors might be good for society as we move into a post-pandemic world.

“There is an old saying that ‘markets ride the escalator up and take the elevator down’,” says Russ Mould of AJ Bell. Last year’s stockmarket gains were steady and serene, with “just 40 daily moves of more than 1% in the FTSE 100 from open to close, compared with 116 the year before”. But with central bankers about to remove monetary stimulus – investors’ “happy pills” – volatility has made a comeback.
Big tech disappoints
America’s S&P 500 and Nasdaq indices both suffered their worst weeks since March 2020 last week, says Ben Levisohn in Barron’s. The tech-heavy Nasdaq is down 15% since its November peak. The trouble started after pandemic winners Peloton and Netflix both issued disappointing trading updates, sending their shares down by 14% and 24% respectively. That has fed a broader sense that the big-tech boom is running out of steam. As Chris Senyek of Wolfe Research notes, the “combination of Fed tightening and some big earnings misses” was what ultimately popped the dotcom bubble in 2000.
The volatility continued into this week. The FTSE 100, which has largely avoided the sell-off, fell by 2.6% on Monday. The pan-European Stoxx 600 lost 3.8% for its worst day since June 2020 as tensions over Ukraine heightened the sense of gloom. The same day on Wall Street, the S&P 500 crashed 4% in the morning only to then rally and close the day with a small gain. Such extreme trading reversals are exceedingly rare. The CBOE Volatility index, dubbed the “fear gauge”, has jumped to its highest level in more than a year.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The Nasdaq has retreated to the same levels it was at in June last year, says Bill Blain in the Evening Standard. That could be “the curtain-raiser to a more chaotic market collapse”. The sell-off in Peloton and Netflix is justified – “both are in highly competitive sectors” and will lose out from the end of the pandemic. The sign that something bigger is afoot is that even the likes of Apple and Microsoft, some of the “most profitable firms in the history of capitalism”, are tumbling. “The bubble pops when a collapse in weak stocks spreads as a contagion to strong stocks”.
Pandemic endgame
“Momentum is building against companies with exciting promises to reshape the world,” says Graeme Wearden in The Guardian. Tech stocks are heading for a “crunch fortnight” as its biggest names report their latest earnings. “They must prove they can thrive in a post-lockdown world where the cost-of-living squeeze is leaving people with less money for tech products and services.”
Big tech’s giant market rally has rested on two assumptions, says the Financial Times. “One was that lockdowns would permanently change how we live our lives,” the second was that interest rates would stay ultra-low “for the foreseeable future”. Both are now being brought into question. What’s bad for tech investors might be good for society: instead of betting on more bouts of lockdown misery, markets are ready to move on from the pandemic. “Those of us who prefer a busy social calendar to social distancing should be pleased.”
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
5 ways your boss can help boost your pension
Workplaces have a huge opportunity to make employees more aware of their pension options throughout their career – here’s how your employer can help boost your pot to help give you a more comfortable retirement
-
Car finance compensation: FCA warns drivers against using rip off claims firms for share of £18bn
The FCA estimates most eligible motorists will receive around £950 in compensation per agreement – and said they won’t need a claims management company or law firm to access a redress scheme
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeek
Interview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
The City's big bet on green finance fails to pay out
Opinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Okta: an undervalued cybersecurity play
Okta provides vital security services and appears cheap considering AI’s growing prominence
-
Should you invest in Pakistan – the Vietnam of South Asia?
Opinion If Pakistan is now serious about reform, it’s time for investors to buy, says Maryam Cockar
-
The AI barons call time on the bubble
Opinion OpenAI's Sam Altman and other tech giants are warning that the AI boom is reaching dangerous territory. They may end up as the authors of their own demise
-
How to find value in global equity markets
Global equities beyond America’s pricey market are bargains, says Rupert Hargreaves
-
Emerging market stocks deliver strong growth at a bargain
Emerging markets offer access to some of the world’s most compelling investment themes – here's how to gain exposure
-
European bank stocks bounce back
Opinion European bank stocks were part casualty and part cause of Europe’s lost decade. Now it’s clearly turned the corner, says Cris Sholto Heaton