Financial markets follow their own sets of rules and behave with a certain kind of logic, even when they appear to behave irrationally. Consider the past week, when the major indices all suffered losses: The Dow Jones Industrial Average dropped 4.6%, the S&P 500 lost 5.7% and the Nasdaq Composite fell 7.6%.
There’s no disputing the numbers, but it’s not like those disappointing results came out of the blue. The Fed has signaled an end to the era of easy money, and Washington is tempering its generosity. Those simple facts have made investors uneasy, which is understandable.
“It’s hard to be optimistic when the Nasdaq’s highest-flying stocks keep finding ways to disappoint investors. The biggest shockers, of course, came from Peloton Interactive (ticker: PTON) and Netflix (NFLX). Peloton lost 14% of its value this past week after a report that it would be halting production during February and March. Peloton denied the shutdown plans but acknowledged that it had to right-size its business, given lower demand for its bikes and treadmills. Netflix, meanwhile, dropped 24% after it told investors it expected to add just 2.5 million subscribers during the first quarter of 2022, well below forecasts for 5.7 million,” writes Ben Levisohn of Barron’s. “It makes you wonder what the coming week will bring, when the likes of Apple and Tesla report.”
I’ve never shied away from my natural sense of optimism, and I’m not about the throw in the towel now. Frankly, I’m anticipating another strong year for technology companies, and it wouldn’t surprise me if tech continues to drive the wider economy. That’s been the trend for a while, and it’s not going to stop just because the Fed is doing pretty much exactly what everyone expected it to do.
At times like these, I like to focus on earnings. So far, the corporate spreadsheets look good, and I’m betting the storm clouds will dissipate. Maybe they won’t go away as quickly as we want them to. But they will go away, probably sooner than later, and the sun will shine again on Wall Street.
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