Why inflation hurts tech stocks? (2023)

Why rising rates hurt tech?

A lot of those tech stocks are fairly expensive, but investors have been able to justify the higher prices because the companies forecast big growth in the future. But when interest rates are higher, that makes future profits appear less valuable.

What stocks perform well during inflation?

Here are some of the best stocks for inflation:
  • Energy.
  • Financials.
  • Precious metals.
  • Consumer staples.
  • Property Real Estate Investment Trusts (REITs)

Is inflation bad for tech stocks?

Tech stocks are particularly sensitive to inflation, rising interest rates and a strong dollar, similar to the broader economy.

Why are tech stocks falling so hard?

2022 hasn't been a great year for the stock markets, especially for tech stocks. The tech-heavy Nasdaq index has fallen more than 30% since Jan 2022 and falling into a bear market due to interest rate hikes, rising inflation, macroeconomic uncertainty, global pressures and the strong US dollar.

Why are tech stocks performing poorly?

That's because companies can't count on venture investors to subsidize their growth and public markets are no longer paying up for high-growth, high-burn names. The forward revenue multiple for top cloud companies is now just over 10, down from a peak of 40, 50 or even higher for some companies at the height in 2021.

What is the outlook for tech stocks?

Analyst: Tech stocks will rise 20% in 2023 | CNN Business.

Who benefits from inflation?

1. Collectors. Historically, collectibles like fine art, wine, or baseball cards can benefit from inflationary periods as the dollar loses purchasing power. During high inflation, investors often turn to hard assets that are more likely to retain their value through market volatility.

What not to buy during high inflation?

While the effects of inflation are not easily avoided, several financial planners tell Fortune that there are steps consumers can take to duck the worst effects.
  • Avoid buying a car if you possibly can. ...
  • Grow investments, rather than savings accounts. ...
  • Think about buying more veggies. ...
  • Spend less, if you can.
Dec 13, 2021

Why do tech stocks fall when inflation rises?

Key takeaways. When interest rates rise, stocks tend to fall in value because of lower future earnings. Higher inflation leads to higher interest rates, which do impact the stock market. Investors need to build a diversified portfolio to ride out declines in the stock market.

What stocks get hurt by inflation?

10 Stocks Most Affected by Inflation
  • Beyond Meat, Inc. (NASDAQ:BYND) Number of Hedge Fund Holders: 14. ...
  • Whirlpool Corporation (NYSE:WHR) Number of Hedge Fund Holders: 24. ...
  • Coinbase Global, Inc. (NASDAQ:COIN) ...
  • MetLife, Inc. (NYSE:MET) ...
  • Tractor Supply Company (NASDAQ:TSCO) Number of Hedge Fund Holders: 37.
Dec 14, 2022

How long does it take for tech stocks to recover?

Tech stocks could bounce back by next year, but it will be a 'volatile ride,' Citi says. The year 2022 hasn't been a good one for tech stocks, but that could change soon. There might be light at the end of the tunnel for tech stocks after a rough few months.

Why are tech stocks tanking?

Weak economic growth, rising inflation and a strong dollar have taken a toll on the tech giants that have an outsize impact on the stock market.

Are tech stocks good for long term?

According to analysts, the tech industry remains a robust choice for business growth and career advancement in 2022. As per a recent report, the information technology market grew from $8,384.32 billion in 2021 to $9,358.51 billion in 2022 at a compound annual growth rate of 11.6%.

Are big tech stocks falling?

Big Tech stocks collectively lost nearly $4 trillion in market value in 2022. In 2020 and 2021, one of the best places for stock investors to have their money was in mega-cap technology stocks. In 2022, it was one of the worst.

How rising interest rates affect tech stocks?

High-growth tech stocks “are hit harder than value by interest rates because their cash flows are further into the future.” Through the first half of the year as the Fed pursued aggressive interest rate hikes, technology stocks fell more than the broader market.

How does inflation affect tech?

Chisholm agrees that inflation is a significant obstacle to a tech recovery. “History shows that tech growth stocks have typically struggled when inflation has been high. Their market-leading performance mostly came while inflation was exceptionally low by historical standards.

Is higher interest rates good for tech stocks?

“At a high level, rising interest rates are usually negative for long-duration technology and growth assets,” Li said.

Who benefits the most from inflation?

Who Can Gain From Inflation? 7 Biggest Inflation Winners
  • Collectors.
  • Borrowers With Existing Fixed-Rate Loans.
  • The Energy Sector.
  • The Food and Agriculture Industry.
  • Commodities Investors.
  • Banks and Mortgage Lenders.
  • Landowners and Real Estate Investors.
Dec 1, 2022

Why do tech stocks go down when bonds go up?

Bonds affect the stock market because when bonds go down, stock prices tend to go up. The opposite also happens: when bond prices go up, stock prices tend to go down. Bonds compete with stocks for investors' dollars because bonds are often considered safer than stocks.

Are tech stocks sensitive to interest rates?

High-growth tech stocks are particularly vulnerable to rising interest rates, which depress the present value of future earnings. As rates move higher, they raise the discount rate that analysts use to value future cash flows.

What items are hit hardest by inflation?

Gas, Car Repairs, Energy, and Food Prices Rose in 2022

If your vehicle broke down, repair costs definitely took a toll. Fixing your car cost close to 21% more since the beginning of 2022. Car insurance was also on the list of items hardest hit by inflation this year, rising nearly 17%.

Who are the losers in times of high inflation?

Throughout periods of high inflation, there are certain companies that come out as winners and others that are losers. Sectors like consumer discretionary and tech can often struggle during periods of rising prices, while consumer staples and the energy sector tend to remain much more resistant.

Will tech stocks ever recover?

Tech stocks could bounce back by next year, but it will be a 'volatile ride,' Citi says. The year 2022 hasn't been a good one for tech stocks, but that could change soon. There might be light at the end of the tunnel for tech stocks after a rough few months.

You might also like
Popular posts
Latest Posts
Article information

Author: Maia Crooks Jr

Last Updated: 04/02/2023

Views: 6102

Rating: 4.2 / 5 (43 voted)

Reviews: 90% of readers found this page helpful

Author information

Name: Maia Crooks Jr

Birthday: 1997-09-21

Address: 93119 Joseph Street, Peggyfurt, NC 11582

Phone: +2983088926881

Job: Principal Design Liaison

Hobby: Web surfing, Skiing, role-playing games, Sketching, Polo, Sewing, Genealogy

Introduction: My name is Maia Crooks Jr, I am a homely, joyous, shiny, successful, hilarious, thoughtful, joyous person who loves writing and wants to share my knowledge and understanding with you.