The tech-laden Nasdaq is down more than 25% year-to-date despite Friday’s 4% relief rally.

Many of the tech names that dominated portfolios have seen their shares plummet in the last few years. The so-called FAANG stocks are Meta, Amazon, Apple, andAlphabet.

Since the start of the year, the shares of FAANG are down 37%.

Work-from- home tech names like Peloton and Zoom, which were popular with investors, have seen mounting losses, as well as promising tech startups like the retail investing platform Robinhood and the EV maker Rivian.
Many market watchers are wondering what happened to the tech market. Tech stocks have faced a number of challenges from recession fears to rising interest rates. Is the losses bad?
Some experts argue that the tech sector is oversold, but the reality is that tech companies have an uphill battle. Here are the reasons.

There has been a year of macroeconomic challenges.

Tech stocks have been hammered by a number of macroeconomic factors, including the war in Ukraine, high inflation, supply chains being snarled, and slowing economic growth.

This is probably the most complex macro backdrop in the last 100 years, according to a Friday note from Dan Ives. There is a new world of social media where every data point can be analyzed by millions of people and influence markets in seconds.

Tech shares are facing more challenges than most and this isn’t great news for stocks in general. Throwing money into highly speculative risk assets in times of economic pain isn’t a good idea for investors.

Instead, many are looking to safe-haven assets to protect their portfolios, as evidenced by the out performance of value stocks and soaring demand for gold in the first quarter That is bad news for tech.

During this week’s brutal stock market sell-off, technology stocks suffered their biggest withdrawals of the year with investors taking $1.1 billion out of the sector, according to Bank of America strategists led by Michael Hartnett.

Hartnett and his team said it was a sign of true capitulation when investors ditch their most beloved holdings like they have this week.

According to the strategists, fear and loathing suggest that stocks are prone to an imminent bear market rally.

A tough landing.
As the Federal Reserve raises interest rates to combat inflation, investors are concerned about a recession. In order to ensure a soft landing for the U.S. economy, the central bank has been attempting to keep inflation low.
Even the Fed Chair admits that it could be difficult. Both institutional and retail tech investors have been leaving.

“We believe these stocks are pricing in a hard landing, with fears abound,” said Dan Ives.

It’s no wonder why, really. Soft landings are difficult to pull off.
Over the past 70 years, there have been 14 episodes of Fed tightening and 11 recessions, with only three soft landings, according to a Monday note by Morgan Stanley Wealth Management’s CIO.

Shallet describes the Fed’s attempt to increase interest rates and decrease the size of its balance sheet as an unprecedented feat.

In order to increase the money supply and drive lending to consumers and businesses, the Fed used Quantitative Easing, buying billions of dollars of mortgage-backed securities and government bonds every month.

The recent economic recovery was one of the most impressive in history, but it was also boosted by the increase in risk assets like tech stocks.

Tech investors are worried that we could see another dot-com bubble now that the free money era is over. Many analysts think that the tech sell-off will come to an end soon, and the Street has its fair share of tech bulls.

This isn’t a Dot-com Bubble 2.0 in our opinion. It’s a massive overcorrection in a higher rate environment that will cause a tech tape with clear haves and have-nots.

There will be many tech and EV players that go away or consolidate, but top names in sectors like cybersecurity and cloud software should continue to perform well in the long run, making this a “generational buying opportunity” for investors willing to take on more risk.

Tech stocks are often valued by their ability to grow revenues, and rising rates present unique challenges.

A tech sector is repricing.

Tech stocks are sensitive to rising interest rates due to discounted cash flow models that sell-side analysts use to value equities.

Future cash flows of a company are forecast and then discounted back to their current value in order to arrive at a value for what they are worth today.

Interest rates are the key factor used in the process.

As interest rates go up, the value of a company’s future earnings goes down. The impact of rising interest rates on a stock’s valuation is worse when the expected growth of future earnings is larger.
High-flying tech companies, which are often valued so highly not because of their profitability, but because of their growth potential, are the hardest hit.

Dave Smith, head of technology investing at Bailard, told Fortune that when rates rise investors shorten their time horizon andscribe less value to cash flows in the future. Today’s technology companies tend to invest more in future growth than they did in the past. The stocks have not performed well as rates have gone up.
Most FAANG names can still provide 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 is a 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299

There are a lot of babies being thrown out with the bathwater in the current fear-driven environment, but it may not be as simple as ‘Buy FAANG’ anymore. He said it was an opportunity for long-term investors.