Nasdaq Has Been Corrected
On Monday, the Nasdaq composite closed down 2.22% and is down more than 10% below its February 12 record close. A correction is a decline of 10% or more in the price of a security from its most recent high — the Nasdaq has officially been corrected as technology stocks continued to be beaten down on Monday.
Leading mega-cap tech companies accounting for the Nasdaq’s total market value performed well during the pandemic — the Nasdaq gained over 40% last year. However, as economies have started to recover from the pandemic, investors are starting to view some tech companies as overvalued. Shares of Apple are down more than 12% this year, Amazon is down more than 9%, Facebook down over 6%, and Tesla is down more than 20%.
Rising bond yields have made investing in high-growth companies like big tech less attractive as investors look to invest their money in value companies instead.
Cyclical and value stocks were initially beat down due to the government-mandated shutdowns and temporary store closures. But now, investors are becoming more bullish on value stocks as more vaccines are distributed, and pandemic restrictions are lifted. The economy is recovering, rates are rising, and tech stocks are retreating.
President Joe Biden’s $1.9 trillion stimulus bill was passed by Senate Democrats over the weekend and is expected to be signed by him as early as today. The $1.9 trillion in fiscal support is expected to speed up the economic recovery and could mean more selling off tech stocks and more rotation into cyclical sectors expected to rebound with the economy, like energy and banking.
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.