Share prices of many technology companies soared during the pandemic. This
resulted from a combination of lockdowns caused by the Coronavirus keeping
customers at home and ultra-low interest rates, adding to the appeal of more
speculative investments.
The popularity of these tech equities, which had dominated prior years,
waned in 2022. With the pandemic’s lockdown diminishing and a definite end in
sight, these companies’ growth possibilities have reached a tipping point. The
S&P 500 index sank 1.8 percent on Thursday last week after recent CPI
data showed a 0.6 percent increase, while the technology-heavy Nasdaq fell 2.1
percent. We cannot sustain low interest rates indefinitely. It is critical to
raise interest rates to combat growing inflation, which is currently at 7.5 percent.
The Federal Reserve announced earlier this year that it will pursue an
aggressive monetary policy, to raise interest rates four times this year. If
the Fed sticks to its objectives, the coming months could be much more
unpredictable, putting unprofitable growth enterprises at risk.
Geopolitics is exacerbating a precarious scenario. The S&P 500 index
fell 1.9 percent on Friday as tensions on the Russian-Ukraine border
intensified. This isn’t helping the market at all, and in the coming months, we
can expect more volatility.
With such a bleak image painted, the real challenge is how to maneuver in
this minefield of a market.
Because I focused on UNPROFITABLE growth stocks in this post, all we need to
do now is look at profitable growth stocks. Isn’t it simple?
Well… Yes and no. For example, Meta, formerly known as Facebook, is
profitable but is under intense competitive pressure from TikTok, etc. If we
see positive figures from the meta verse (VR), it could be a suitable
alternative, but unfortunately, that is not the case, at least not now (A topic
for a later date). We need to look for successful, growing businesses that the
opening of economies will not hamper. It’s simple to say, but difficult to do.
However, I will write about this as well soon. I hope this gives you a quick
overview of what’s going on in the markets.
Comments
Post a Comment