What goes up, must come down.
Over recent years, there hasn’t been a safer bet than big tech – specifically the FAANG stocks, which include Facebook, Apple, Amazon, Netflix, and Google’s parent company Alphabet.
But in the financial world, this feeling of euphoria can be turned upside-down very quickly.
Since the summer, the five tech giants combined have lost close to $1 trillion in market capitalization from their peaks. Now the FAANG stocks have officially slipped into a bear market, with investors blaming rising interest rates, slumping sales forecasts, possible government intervention, and bubble-like valuations as reasons for the reversal in fortune.
THE DAMAGE DONE
The generally accepted definition of a bear market is a 20% or greater decline from recent market highs.
Facebook and Netflix have been in bear territory for months, but the remaining members of FAANG only just recently capitulated. Apple was the last to go – but with -24% in lost value since its peak on October 3, it is now in trouble as well.
Interestingly, this is the first time that the FAANG stocks have been in a bear market together, meaning this is uncharted territory for big tech and the wider market as a whole.
AFTER THE GOLD RUSH
While FAANG represents a small fraction of tech stocks available on the market, they do make up a significant percent of indices like the S&P 500 or the Nasdaq Composite. As a result, this slump can impact the rest of the market – and it manifests a more general malaise that other, less-beloved tech stocks must deal with.
Unsurprisingly, the Nasdaq Composite – a technology bellwether – is feeling the pain as well:
The sentiment can also be seen in other tech names, some which have been slumping for awhile and others which have fallen into a funk only recently:
Even SaaS darlings like Salesforce.com can’t shake the trend – the stock entered bear territory itself on November 19th.
