Top CEOs and financial backers have sent out a hopeful vibe on the new sales of global tech stocks. They were reported to have told CNBC that the chances for these to metastasize into a more significant market crisis are seemingly low. Read more below what’s next for markets.
What’s Next for Markets
Nasdaq 100, although heavy on the tech, closed the index on Monday by trading down 26% more in the year-to-date and earlier this month. This was after the Federal Reserve increased the interest rates. Thus, the largest tech companies in the world have shed more than $1 trillion in value—all these within three trading sessions only.
The prospects of higher rates have caused tech and growth stocks to be the hardest hits. This is mainly due to the Fed and the top central banks worldwide aiming to control the soaring inflation by putting out stricter monetary policies.
In an talk with CNBC, UBS CEO Ralph Hamers said that there would be the question of what the exact market value of some of the models should be. He added that the underlying business models are the true ones not only today but for the coming years. And, in terms of service deliveries, the advice and what people have digitally.
An Orderly “Sell-Off”
Basing on what the U.S. Federal Reserve has announced, it has no intentions of hesitating in lowering interest rates. That is until inflation goes down to a reasonable level. In addition, the aggressive pivot it took while the global prices increased is what drove investors away from the tech stocks.
In spite of the Fed’s efforts to manage expectations, the markets are overreacting, says David Rubenstein, billionaire investor and co-founder of Carlyle Group, a private equity firm. He added that there were internet companies without revenues from the crash of 1999 until 2001. They shouldn’t have gone public, Rubenstein said.
When Markets “Overreact”
Rubenstein added further and used Netflix as an example. He said that with its 250 million subscribers today, it wasn’t worth what it was a few months previously. In his opinion, the movie streaming company is worth more than what it’s trading for today.
When markets overreact, Rubenstein said that opportunities abound for investors. This is the best time to go in and “buy at the bottom.” As of today, Netflix’s stock has gone down by almost 69% in the year-to-date. This is while Amazon went down by more than 35%.
At the World Economic Forum in Davos, Switzerland, Citigroup CEO Jane Fraser notes that from the Wall Street bank’s perspective, the sell-off in the U.S. was “remarkably orderly” amongst the investors. When the crash happened during the world financial crisis, a fairly systematic takedown and change in asset allocation were what they saw, she added.
High Growth Amid High Disappointment
Recently, the technology sector’s profit growth rate has caused the valuations to fall. Maurice Levy, Publicis Groupe’s chairman of the board, had this to say. He added that the companies had set an ample precedent in the high earnings season, albeit deceptively.
Levy also stated that the sector, which had seen a 30% to 50% growth when these were previously reaching only highs of 25% up to 15% was disappointing. He added that this sector should not be used as a gauge due to high expectations. He also said that investors should remain calm and with a longer view. In the meantime, he said to keep calm as the telcos, and everyone investing in advertising has numbers that are relatively doing good.
And for other news, read more here at Owner’s Mag!
