I'm Trying to Understand the Tech Stock Decline (and Why I Might Recommend Buying More Tech Stocks)

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Yes, the global stock market is currently down. There's no use for the Filipino people to blame President Ferdinand R. Marcos Jr. for that matter. At this point, I'm still invested in the ATRAM Global Technology Feeder Fund (read here). Right now, I've observed the trend went downward. After the CrowdStrike outage and some problems at Microsoft--I expected that there would be a downward turn. The reasons why stocks appreciate and depreciate are company performance, investor sentiments, industry performance, and economic factors. All these drive the supply and demand up and down. With what happened to Microsoft and CrowdStrike, the setback may have caused people to sell off their Microsoft stocks. In turn, the supply of Microsoft stocks will increase again and the demand will lessen due to investor sentiments.

As I Googled "Why must the stock market go down", I ran across the four reasons that the stock market is plunging this 2024. One of the reasons is because of the technology stock sector. Here's what's written and it would make sense why technology stocks are currently down, blaming it on high expectations:

Some of the worst-hit stocks during the rout can be found in the tech sector, with the so-called Magnificent Seven, a group of tech stocks including Amazon, Apple and Nvidia, among the market's worst performers on Monday. Nvidia, the chip company whose technology powers artificial intelligence, has shed 23% of its value since July 31. 

Prior to last week, these stocks had been among the year's best performers, which meant that Wall Street had lofty expectations for their revenue and profit growth. And while their earnings reports have been solid so far this year, they haven't wowed investors.

"Even if earnings come in as expected, the valuation multiples are so high that it's hard to sustain" those prices, PNC's Agati said. "Investors are panicking, and this is a really rapid sentiment shift."

She added, "We don't think the underlying fundamentals support this shift. For the most part, the Magnificent Seven have been fine in terms of earnings results."

It's easy to have high expectations in the tech sector. I invested some money in the ATRAM Global Technology Feeder Fund and the AXA Global Opportunity Fund for that reason. However, we must understand that what goes up, must come down. The Microsoft problem is just one of them. People have been using Microsoft for a long time.  

May 2022

If we take a look at this sample allocation done by ATRAM--it can be easy to tell why it went down. Microsoft and Apple are in the list. You have Alphabet (Google) and Amazon. It would mean that these sectors are all affected. If the companies are reliant on Microsoft and Crowdstrike--I can just expect that a global outage shifted consumer sentiments. It can say, "Oh no! What are we going to do?" for those companies. Flaws and setbacks are bound to happen every now and then. That's why there's always the need for updates and double-checking. For some people, they may be looking at this as a temporary setback. They would think that Microsoft will eventually bounce back.

Pretty much, here's what CBS News' Aimee Picchi would recommend for those who are currently invested: 

First it's important to understand that stock downturns — even sharp ones — are common. Although the S&P 500 is down roughly 8% from its peak in July, drops in equity prices of 5% or more have occurred at least once a year for the past four decades, according to Oxford Economics. Market corrections, or a drop of at least 10% from their highs, occur an average of every one and half to two years, the firm said in a report. 

But even bear markets, or when stocks decline at least 20% from their peak, are normal and aren't a reason to panic, experts say. While the temptation might be to sell, it's best to resist that urge, especially for people saving for the long-term such as for retirement. Market timing, or trying to buy and sell stocks to capture gains and avoid losses, is notoriously difficult and can lead to lost opportunities, research from Charles Schwab has found.

"If you are a long term investor, take a deep breath — it is very scary, I get it," Jill Schlesinger, the business analyst for CBS News, told the network. "As long as you are in a long-term portfolio, you shouldn't worry."

Moving into cash "is never a good investment," added PNC's Agati. That's especially the case when the Fed is widely expected to cut rates as early as September, which will reduce the returns for savings accounts and money market funds. 

"If you are worried about your retirement plan, I wouldn't be pulling the plug and moving to cash," Agati added, noting that he would look at investment-grade fixed income investments or U.S. Treasuries because they may provide more attractive yields moving forward.