The stock market is up slightly Thursday morning as investors continue to eye the selloff in the tech sector. Skittish shareholders are concerned about the Federal Reserve’s tightening fiscal policy in the latter half of the year, which has led many to sell out of their long-held positions on shares of companies like Microsoft, Apple, and Amazon.
As this sell-off continues, many analysts now believe the bear sentiment in the tech space is nearing its peak. Does this mean that fortunes will reverse soon and put Silicon Valley back in the black on Wall Street?
“Our conversations with institutional investors is clearly very negative [on big tech stocks],” Brent Bracelin, a tech analyst for Piper Sandler, told reporters. “Folks continue to be very concerned around increasing global risk. That said, my personal view is, it feels like we’re kind of nearing peak bear sentiment.”
How Bad is the Tech Sector?
Some casual investors might not realize how grim things have become for the tech industry. So far, Facebook, Amazon, Apple, Microsoft, Google, Netflix, and Tesla are all down at least ten percent on the year. Those seven companies were once considered unshakeable investments that would be a safe bet for any newcomer. Now, they’re more volatile than ever, and retail investors are scrambling to get their money out of them before things get worse.
Netflix and Tesla each deserve special mentions here. Due to abysmal subscriber growth and tanking revenue, Netflix has shed an eye-watering 68% of its share price year-to-date. The company has expressed its plans to crack down on password sharing to drum up more subscribers. However, users’ sentiment on social media indicates that many viewers are sick of the service constantly hiking its prices while canceling fan-favorite shows after a single season.
On the other hand, Tesla has dropped 18% this month as its CEO, Elon Musk, spent all of April courting the social media platform Twitter. Musk’s massive purchase of the popular platform has dominated tech headlines in recent weeks. Still, it’s also caused investors to worry that the CEO isn’t paying enough attention to his other companies.
When Will Things Get Better?
The stock market is fickle, and there’s more volatility in the financial sphere right now than in the past ten years. Shipping delays and the Russian invasion of Ukraine have brought havoc to the global economy, and investors are more cautious now than they have been since the 2008 financial crisis.
“Everyone is universally bearish,” Bracelin went on. “Typically when you have all investors on one side of the boat, that is typically when the boat flips. There is probably more risk for the next two quarters around slight changes to the numbers, factoring in these increasing global risks. But from a sentiment perspective, it’s hard to see how things can get more bearish from here.”
This negative outlook coincides with the US ramping up its economic war with Russia over its illegal invasion of Ukraine. While the focus of the conflict in news coverage has centered around the warfare and brutal fighting over territory, the West has come to Ukraine’s defense in the financial arena.
US Financial War Heats Up
The US’s battle with Russia has seen the West cut off Moscow’s most reliable revenue streams. Russia exports sizable amounts of natural gas to Europe, which has previously helped fund the country’s military. However, as the US pressures the Russian economy and slows its ability to liquidate its assets, Moscow will have to weigh paying its sovereign debt obligations or continuing its war effort.
Meanwhile, Ukraine’s defenders are doing the unthinkable: they’re winning. While the West was initially hesitant to send heavy war equipment to the Eastern European nation, it’s now sending tanks and missiles to aid Ukraine in its war effort. Early in the invasion, US intelligence surmised that Ukraine would fall to Russian military might in a matter of days. Instead, Russia’s eastern neighbor has punched far above its weight, holding out for over two months and pushing the invaders back from its capital city.
The fear that international analysts now hold is that Russia could begin to weaponize its oil and gas shipments. The US has largely avoided targeting these energy exports, as Europe’s economy relies on the energy it imports from Russia. If Moscow turns off the tap on these vital assets, it could send Europe’s economy into recession even as it empties the Kremlin’s coffers.
Foreign policy experts aren’t worried that this conflict could boil over into a third world war, for the most part. Instead, they’re concerned that the West’s economic war with Russia could spur a new type of financial cold war that will reshape foreign relations for decades. Global financial systems and an interconnected international economy have helped the world enter a new kind of conflict.