Investors seek stability as stocks fall
Goodbye iPhones and Facebook feed. Hello power plants and bleach.
Since stocks began tumbling two months ago, investors haven’t abandoned the market. At least, not all of it. In recent weeks, as they’ve pulled money out of funds that invest in go-go technology companies, they’ve also been buying utilities, companies that make everyday necessities for consumers and other stocks that tend to have smaller swings in price than the rest of the market.
It’s part of a big shift in investor behavior as fears about rising interest rates, a global trade war and slowing economic growth around the world have roiled markets. The S&P 500 plunged as much as 2.2 percent Tuesday, with technology stocks again suffering particularly sharp losses, and the index has lost nearly 10 percent since setting its record on Sept. 20.
Technology stocks’ fall marks a big turnaround from earlier this year, and from much of the bull market that began nearly a decade ago. After leading the market higher on the backs of their strong profit growth, Facebook and other big-name tech companies have recently stumbled on concerns that increased government regulation will dent their profits, on top of all the other concerns dragging on the rest of the market.
Apple has slumped particularly hard on fears that its newest crop of iPhones isn’t as popular as expected after phone-part suppliers gave discouraging forecasts. Apple has plunged 19.6 percent since the S&P 500 set its record two months ago, nearly double the loss of the index. Amazon, the third-most valuable U.S. company after Apple and Microsoft, has fallen 23.1 percent over the same time, during which it gave a forecast for revenue growth this holiday season that fell short of Wall Street’s high expectations.
After their years of eye-popping returns, those stocks had become some of the most popular to own among hedge funds, mutual funds and other investors. But just as they bought the stocks together on the way up, investors are now heading for the exits en masse as well.
“There’s no doubt that tech companies are widely owned, people have made a lot of money on them and we’re finally seeing for the first time where the rotation is having some legs,” said Nate Thooft, senior portfolio manager at Manulife Asset Management.