SocGen’s head of quantitative equity research, Andrew Lapthorne, described the Nasdaq’s decline in market cap as “truly staggering”, with the tech-heavy index losing US$7trn-plus over the past six months. In a note released on 10 May,
SocGen writes that the loss has wiped out all the "extraordinary" gains that came after the Pfizer vaccine announcement in 2020. Global markets had a record month in November 2020, with impressive gains across the board spurred on by the prospect of a swift rollout of COVID-19 vaccines from Pfizer, Moderna, and AstraZeneca, among others.
According to Lapthorne, when disentangling the data, the most expensive quintile of stocks is moving the most, down 30% from its highs in the US and 20% in Europe. He notes that there are “… clear signs that we are in the midst of a valuation-led bear market, with the most expensive stocks in the market falling the quickest,” adding that it is “likely that today’s valuation bear market will be followed up by a more traditional cyclical bear market, just as it did in the 2000-2003 period.”
Over the six-month period to 9 May 2022, the Nasdaq is down c. 25%, while YTD, the index has lost 24.5% of its value. A brutal April saw the index losing c. 13.5% - its worst monthly performance since October 2008. Losses were especially severe for the largest tech companies and the FAANG grouping of Facebook parent Meta, Amazon, Apple, Netflix, and Alphabet (Google), which saw their share prices fall by at least 10% MoM. This included a 24% MoM drop for Amazon, as its 1Q22 e-commerce sales fell and costs increased sharply, and a 50% plunge in Netflix’s share price, as it saw subscriber numbers fall for the first time in a decade.
Equity markets have also struggled over the past few months due to high US inflation (at its highest level in c. 40 years) and the Federal Reserve’s attempts to contain prices by raising rates. In addition, Russia’s ongoing war in Ukraine, and strict movement restrictions in parts of China to curb COVID-19 infections, has raised supply chain worries and rattled investors.
Written exclusively for Moore South Africa by Marco de Matos from
Anchor Research.