What’s happening: The tech-heavy Nasdaq Composite last week deflated investors who had hoped the sector was finally on the way to life after suffering its worst first half in decades.
Last month, the Nasdaq made a strong rally that continued into August. The index went on its longest weekly winning streak since November and entered a new bull market.
The jump followed some positive inflation data released earlier this month that boosted investor sentiment and relieved the stock market. The consumer price index rose 8.5 percent year-on-year in July, down from 9.1 percent in June. This raised hopes that the Federal Reserve would take a less aggressive approach to future rate hikes.
It seems that the central bank will not be as gullible as investors would like.
“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Fed Chair Jerome Powell said Friday from the central bank’s Jackson Hole symposium.
Tracking the results: The comments sent the markets crashing. The Dow lost more than 1,000 points, or 3%, and the Nasdaq fell 3.9%.
Because the tech sector is so forward-looking, it is particularly sensitive to changes in interest rates and inflation. When prices are low, tech company valuations tend to rise and become higher, as risky investments look more attractive. When interest rates rise, it is difficult to court investors.
Companies that rely on consumer spending and ad revenue — think names like Amazon, Facebook and Twitter — could be in trouble. But it’s not all bad news, according to Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute.
He sees companies like Cisco and Microsoft as worth buying in software, hardware and semiconductors.
“It’s a secular theme for us,” he said. “Advances in automation and the Internet of Things give these companies a longer shelf life.”
The hard part, he said, is that “the discretionary earnings shoe has yet to drop for tech.” Consumers may scale back spending as inflation continues to bite. Buyer beware.
Don’t rule out Amazon’s healthcare push just yet.
“Healthcare has been very slow to adopt and adopt technology,” said John Porter, chief investment officer at Newton Investment Management. “All the big tech firms have seen health care as an area they can get into and improve. But then they see how complicated it is. There are privacy issues, and payment. It’s a very complex system.”
That doesn’t mean it’s the end. Amazon is still heavily invested in Pillpack, a digital pharmacy service, and OneMedical, a primary care chain.
Porter said false starts have been frequent, but tech is starting to dip its toe into the health sector. And he has a word of advice for the industry: stick to what you know.
“Everybody has some sort of health tracker on their wrist,” he said. “It’s a Trojan horse for tech to get into business.”
He added that by allowing consumers to track their health data and report it to doctors if they choose, tech companies can address numerous legal and regulatory issues associated with the health care industry. not required.
After all, trial and error is what tech companies should focus on right now.
“They can step back and try another approach to the market, which is what you’re seeing with Amazon,” he said. “It’s a bit of a discount, but it’s a big money opportunity.” Big Tech isn’t going anywhere.
Mark Zuckerberg is not a morning person.
- Zuckerberg deflects criticism of his recent AI launches. New chatbots have been introduced. Aggressive speech patterns, and its virtual reality system has been initially criticized. He said that there will never be a perfect artificial intelligence system.
- He said Meta’s next VR headset will include new features to create a sense of “social presence.” “There is more non-verbal communication when people are with each other than when they are communicating verbally.”
- Zuckerberg addressed his company’s decision to reduce the spread of a New York Post article published in October 2020 that made allegations about Hunter Biden. Zuckerberg said distribution of the article was reduced for several days while it was reviewed by the company’s fact-checking partners.
- Zuckerberg discussed working from home during the pandemic, saying it was a good thing for his engineers. “Sometimes it’s better not to be in the office because then people don’t bother you. You want a block of like five hours where you can work on a problem,” he said.
- Marriage is hard, even for billionaires. Zuckerberg said that his focus often breaks when his wife, Priscilla Chan, is working from home. “I’ll be in like the zone, flow concentration, working on something and you know, my wife will like ask me something, like some basic question, and I’ll just be like, ‘Oh man, ‘ It’s like, ‘I absolutely love to lose my flow,'” he said.
- Zack has a rough morning. “It’s almost like every day you wake up and you get punched in the stomach,” he said. “I wake up in the morning, look at my phone, get a million messages. It’s usually not nice. People save nice things to tell me personally.”