04 February, 2022

Weekly Update - Markets swing sharply on Big Tech news

Big Tech companies dominated headlines in the markets this week and their outsized influence caused equity indices to swing sharply from a four-day winning streak to one of the biggest daily losses in the past year.



Late Thursday, Amazon.com Inc. reported a strong holiday quarter, calming Wall Street’s concerns that the company was headed for a slowdown. Profit beat expectations, helped by the cloud-computing division, and investors cheered a price hike for the company’s Prime subscription service. The shares jumped in after-hours trading Thursday.

 

Amazon’s results landed amid a gripping week for Big Tech earnings. Apple Inc., Microsoft Corp. and Google-parent Alphabet Inc. all reported strong results which boosted markets to a four-day rally through Wednesday. But Meta Platforms Inc. suffered the worst single-day share plunge in its history Thursday after reporting slowing user growth in its signature Facebook app. The decline dragged U.S. markets to their worst daily loss since February 2021.

 

The volatility comes as investors also digest concerns about persistently high inflation, this time from the European Central Bank (ECB) with hawkish comments from ECB Governor Christine Lagarde. 

 

The ECB held its interest rates at their lower boundary and said net buying of bonds under its emergency support program will end in March. Meanwhile, the Bank of England hiked its key policy rate for the second time since December and signaled it would start running down bond holdings.

 

Investors are expecting both the Bank of Canada and the U.S. Federal Reserve to begin hiking interest rates in March, after both central banks deferred at their respective January meetings.

 

As markets continue to react and adjust to changing conditions, a continued focus on your long-term goals remains the best course of action. Investing through a well-diversified portfolio has historically provided the best experience through a combination of goals-based returns and reduced volatility over time.

 

  • Short-Term View: Markets have swung sharply this week and stocks are nursing losses for the year as officials begin to pare stimulus to curb inflation.
  • Longer-Term Thinking: Sticking to your long-term plan through periods of volatility is central to investment success.
  • Logic Over Emotion: Perspective is key. Focus on long-term goals and timeframes.

Our Experts Say...

 

“We have confidence that Meta’s sales growth should accelerate meaningfully in the second half of the year as [base effect] comparisons ease and likely drive a strong stock price recovery.”

 

Brandon Geisler

Portfolio Manager

Marsico Capital Management,

US Growth Investment Specialist

 

 

 

Over the past 10+ years, markets are positive. Perspective is key. Markets do react to short-term increases in volatility – see the grey lines below – but the long-term trend is upward in the blue and red lines.

 

 

Source: Morningstar Direct. Growth of $100,000 shown. Total returns from Jan. 13, 2012 to Feb 3, 2022 in local currency.

Volatility is illustrated by the rolling 5-day minimum and maximum percentage change for each of the indices shown.