Yesterday brought a significant drop in the stock market, and especially in big tech stocks. Apple lost $150 billion in market value in a day; that’s not real money and its valuation is still above $2 trillion, but it’s a big round number that makes for a compelling headline.
What’s more concerning to me is how yesterday’s news followed weeks of not only climbing equities but widespread comments that ran the gamut from “Treasuries are dead; I guess we’re all betting on equities now” to “Big Tech stocks are the new bonds.”
This raises some questions:
- If government bonds don’t yield enough to make them worthwhile, why wouldn’t people keep piling into growth equity and/or riskier debt, just as they’re doing now?
- If we think about this in the context of retirement planning, are we really comfortable betting the farm on equities? After all, the U.S. government has been around a lot longer than any of the Big Tech firms.
- If Big Tech is held in any significant way to be the new sure bet, how are we going to think about regulating the companies whose profits we’ve all hitched our retirements to?
- Might the ETF trend provide a little slack here, in the hard-to-imagine case that a Big Tech stock (or several) fell so far, so fast that it had to be rotated out of an index? [I doubt it would be enough to matter on any meaningful timescale, but I wonder.]
All of this is at or beyond the limits of my circle of credibility. But the apparent disconnect between the investment case for Big Tech and growing suspicion of how those companies make the profits we’re all hooked on is giving me a lot of pause these days.