The Bears Burn –Losses from Tech Rallies
Beginning this year, AI and tech have fueled generous momentum into a dying stock market, giving some stable basis for investors to pour hard-earned cash in hopes of great long-term returns. Although generally regarded as positive for the economy, the surge of capital into several mega-cap tech companies has opposed efforts made by the Fed to slow economic growth. The S&P 500, the index that tracks the 500 largest companies in the world, just reached levels not seen since April of last year. Passing several resistance levels with ease, the recent two month’s 14% increase has left several bears in the dust. According to data from S3 Partners, short sellers have incurred almost $120 billion in losses in 2023, with over half of that being lost throughout June. Despite the majority of recent sentiment favoring the market, the outstanding amount of capital hedged against stocks may point to a large degree of weariness toward recent events.
With the Federal Reserve continuing its position for zero rate cuts this year, companies will inevitably feel the pain they may not have endured yet. Although inflation is far lower than it was last year, it remains to linger a full two percentage points over the Fed’s desired 2% level. In the past month, investors have pushed economic worries aside, pointing to advancements made by companies like Microsoft, Oracle, Google, and more. Artificial Intelligence has allowed companies to boast of themselves as growth stocks, with the likes of Tesla doubling their share prices in just six months. With no glaring signs of a materializing recession, investors will not miss out on any chance they get to ride the wave of a potential bull market. Nevertheless, it is up to individual investors to use available data and sentiment to judge their position in the market, waiting for newer statistics to clarify any doubts they may have about the state of the economy.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.