The Nasdaq suffered its worst selloff since 2011 on Thursday. It’s down again today. There are a few exceptions: Microsoft is doing OK. But most tech stocks are selling off. As I write, Amazon.com shares are down 1.8 percent.
The situation is not limited to tech — markets worldwide suffered a severe collapse overnight — but up to now technology stocks have enjoyed an almost “party like it’s 1999” levitation. As the San Jose Mercury News put it,
Compared to 2013, when Netflix stock was up an astounding 297 percent and Pandora followed with an 189 percent increase, Colin Gillis of BGC Partners said tech stocks are now showing “clear frothiness in the market, like the foam on your latte. If you were a professional investor in 2013, you had tremendous gains owning those names. So far in 2014, momentum in the (tech) market is clearly stalled. 2013 is over.”
To be sure, portfolio rebalancing happens at the end of the quarter. What else? There’s trouble in Europe and a real slowdown in China. Abenomics has stalled in Japan and Brazil’s current-account deficit is ballooning. The Federal Reserve’s tapering is disrupting the “carry trade” and that’s affecting markets, not just emerging ones. Safer assets are gaining while risky tech suffers. What happens next?
This Week’s Links:
• Why we’re in a new Gilded Age | NY Review of Books
• The problem with profitless startups | Daily Intelligencer
• Jamie Dimon on U.S. growth | Business Insider
• Family structure and inequality | House of Debt
• U.S. fracking companies are licking their lips over Ukraine | The Guardian
• Romer: The aftermath of financial crises doesn’t have to be that bad | Economist’s View
Today’s Econ Haiku:
Will steal Puget Sound workers