What to learn from the recent share price decline of the main US tech companies

November 28, 2018

The last couple of months have seen the share price of the top US and Chinese tech companies decline in the range between 20% and 40%.

 

Why?

 

  1. When investors start to relax the hammer arrive. In the last 12 months I heard several experience investors advising people to invest all their savings in the FANGS. Typical line, you invest £100,000 and forget them for the next 3 years and you will get £1m….Well, I hope people didn’t follow them….

  2. When your taxi driver is talking about Amazon and Apple shares, it is time to sell. Ok, here we are not talking just about taxi drivers, but about people close to you (your girlfriend, your neighbour, your dog…) who do not have a clue of the financial market and tech in general and start to mention in random conversation that they FANGS bought shares;

  3. Correlation effect. The share price of the different FANGS is extremely correlated. It means that investors do not really differentiate among the different tech companies when things are starting to fall. 

Just check the below chart with the correlation in the last 3 months:

4. US interest rate increased by over 1% in the last 12 months. Investors are starting to shift some of their assets to the Bond Market.

 

 

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