After the stocks of large US tech companies had done excellently for several months during the corona crisis, they suffered a setback in September. Now Barclays fears that it could go further down.
?? Barclays: Further sell-off at tech giants possible
?? Real rates could matter
?? Changes must be expected
The US Technology Index NASDAQ has given in over five percent in September. For this, there were index heavyweights like Amazon, Apple, Alphabet, Microsoft, Netflix and Tesla responsible, which had pushed Wall Street to record highs in the past few months.
Real Interest Responsible?
Rising real interest rates could have been a major cause of the recent sell-off. Because like Will Hobbs, Wealth Chief Investment Officer of the major British bank Barclays, told the US broadcaster “CNBC” over the phone that the price slumps of the tech giants coincided with a rise in real interest rates.
In contrast to the nominal interest rate, the real interest rate also takes into account changes in purchasing power, i.e. inflation or deflation. To determine it, one has to discount the invested capital with the nominal interest rate on the one hand and discount it with the inflation rate on the other.
Will Hobbs explained that the change in real interest rates is important for the price development of these tech titans because, given their high valuation and steady cash flows, they are likely to be treated like long-term bonds by some market participants. It could be that the cash flows would to some extent be viewed as fixed expected earnings. The stock market expert therefore believes that the popularity of the tech giants is largely due to the fact that real interest rates have fallen steadily in recent years.
But recently real interest rates moved up again. And although he does not yet see the conditions for a substantial increase in real interest rates, Hobbs warned against completely ruling out a further increase. As a justification, he referred to the currently unprecedented behavior of the international central banks.
Investors should avoid this risk
In general, Will Hobbs warned investors related to the tech giants not to expect the past to continue – that is, assuming the future would look a bit like the recent past.
He is not only thinking of the steadily falling real interest rates, but also, for example, of the “certain regulatory tolerance” that the tech companies have so far been shown. But in recent times they have also grown in their home country USA Reservations about business practices the “Big Four”. A few days ago the competition subcommittee in the House of Representatives found that Amazon, Apple, Facebook and Google abused their market power. “These companies have too much power,” said an investigation report – and this power must be restricted and subject to appropriate supervision.
“History is full of examples of changes in governance, be it political change and socio-political background, macroeconomics or indeed regulation, so the real message to investors is to be careful that their portfolio or investment mix is not sucked in is becoming one of the winners of late in this shrinking, focused group, “explained Hobbs. Instead, he advises: “You should also have a few losers because you should plan for a future that is not just a continuation of the recent past, because this is often not the case.” Finanzen.net editorial team