From technology to cryptocurrencies and beyond, some of the biggest losers of the day are investments that once rode on waves of optimism.
Stock markets continued to sink following last week’s recession concerns, spurred by the Fed’s rate decision and the threat to global growth from China’s continued COVID lockdowns. The fear could be seen across asset classes as traders dumped stocks and other risky assets in favor of cash.
Within the red sea, some of the day’s biggest losers were investments that once rode waves of optimism: newly public companies would outperform; Cathie Wood’s flagship fund is set to recapture its previous highs; cryptocurrency would shine as an alternative investment class. On Monday, the markets seemed to give up on all these dreams.
“One of the things we’ve learned, at least this cycle, is that these speculative, disruptive, growth, alternative, high-risk, high-reward asset classes were much more rate-sensitive than people thought they were. they were,” said Steve Chiavarone, senior portfolio manager at Federated Hermes.
Recently public companies, many of which are expected to post profits in the coming years, have been hit particularly hard. The Renaissance IPO ETF (IPO ticker) lost as much as 8.7% on Monday, the most since March 2020. The fund is down about 50% since the beginning of the year.
For Michael O’Rourke, chief market strategist at Jonestrading, many of these names are “concept stocks” that lack returns and require access to capital markets to survive. “As investors shrink and liquidity dries up, these companies are at even greater risk,” he said.
A Goldman Sachs basket of unprofitable technology companies fell more than 9% at one point on Monday. It has lost roughly 25% in the last two weeks alone and is trading at its lowest levels since May 2020.
“Valuations now matter. Investors demand returns,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
Cathie Wood’s flagship innovation ETF (ARKK) experienced its worst month in April, with its shares tumbling 51% in 2022. Wood and her firm, ARK Investment Management, have been among the highest-profile victims of the stock selloff. , with its flagship firm sinking the fund as much as 9.3% on Monday.
Bitcoin liquidation accelerates
Bitcoin has also been hit hard, with the digital currency shedding 50% from its November peak to drop below $32,000. The digital token has been down for five consecutive weeks and last week alone lost 11%, according to data compiled by Bloomberg. Other cryptocurrencies have also fallen, with the 100 digital asset index down roughly 30% since the start of the year.
The energy sector was the worst performer in the S&P 500, falling as much as 7.5%. After the European Union said it would lift a proposed ban on its vessels carrying Russian oil to third countries, West Texas Intermediate crude sank below $103 a barrel. And Saudi Arabia lowered oil prices for buyers in Asia as coronavirus lockdowns in China reduced demand.
–With the assistance of Vildana Hajric, Denitsa Tsekova, Cecile Gutscher, Elaine Chen and Katie Greifeld.