Following news of Russia’s invasion of Ukraine, stock indexes like the FTSE 100 and S&P 500 plummeted. Investors have been alarmed by the crisis’ potential ramifications, leading to a sharp decline in stock prices. Investment in “safe” assets like gold and government bonds is on the rise as a result of the financial crisis.
The next time technology stocks fall, investors may want to take advantage of the opportunity. Corporations in America are looking for ways to increase productivity, according to Kristina Hooper, an analyst at Invesco. In the long run, “technology will gain from higher corporate investment,” said the firm’s chief global market strategist on CNBC’s “Trading Nation” on Friday. A lot of enthusiasm is in the air.”
Investors, according to her, would have to exercise some patience. “We may not see it in the near term, merely because yields are rising,” Hooper said. Because the 10-year Treasury Note yield is rising, Wall Street’s interest in tech is diminishing. In a situation when interest rates are increasing, growth companies, such as technology, often underperform because earnings are placed under pressure.
The Nasdaq, which is heavily weighted toward technology, has fallen more than 5% from its all-time high, set on Sept. 7, during the previous four weeks. It dropped 74.48 points to 14,579.54 at the conclusion of business on Friday.
As Hooper admits, in the medium term, the background favors cyclical over technology companies. She, on the other hand, feels it’s a blip and anticipates big gains in software and cybersecurity in the near future.
“Individuals will also be spending more money.” She stated that “household net worth has risen significantly.” Hooper advises investors to have a 3 to 5-year time horizon in order to take advantage of the bullish trend and lock in substantial returns. “This is a fantastic medium and long-term investment,” Hooper added.
Should You Buy Stocks Now?
Some firms’ prospects seem bright, but this cannot be true of all enterprises. For investors, financial information on publicly traded firms is useful since it provides insight into their overall health. The epidemic had different effects on different industries, thus it’s important to remember that. According to a general trend, technological businesses have fared better than tourism companies.
You may think of Facebook as an example. In a record-setting daily stock market decline for a US company, Meta Platforms, the company behind the IT darling, had its stock market value plummet by more than $230 billion on February 3 of this year.
A 26% decline in Meta’s stock price, which has yet to recover, came after the firm disclosed that daily active users had fallen for the first time in the company’s 18-year existence. Following the announcement that Russia had invaded Ukraine on February 24, 2022, the majority of major financial markets fell. There is a great deal of fear among investors that the crisis will have a negative impact on the enterprises they own.
Stocks of the UK’s top 100 firms fell 2.8% in their first few hours of trade on February 24, according to the FTSE 100. Selling stocks in a hurry while the markets are dropping is never a wise idea because you run the risk of locking in losses.
Additionally, keep in mind that the stock market has been quite volatile since the outbreak began. When the value of an investor’s investments plummets unexpectedly, we say that the stock market has crashed.
Investors may panic and sell their shares, afraid that the price will continue to decrease and they will lose more money. All you can do is predict how the stock market and your specific assets will be affected by various circumstances. Keep in mind that fast stock price increases are always accompanied by the possibility of abrupt stock price decreases.
Prior to the announcement that Russia was invading Ukraine, the FTSE 100 share price was at a record high.
Buying Opportunities For Investors
A healthy economy and high company profitability are providing a solid basis for a faster technology rebound this time around, even as inflation continues to rise. Having said that, the bottom has yet to be reached. This is anticipated to happen following the Fed’s first-rate rise in March. A half-point hike from the Fed would send growth stocks reeling once again, opening the door for bargain hunters.
Tech and software sales fell quicker than expected, although the peak-to-trough decrease is comparable with previous slumps that corresponded with rate rises. Despite this, software companies continue to trade at a rate that is about double that of the previous 20 years.
No one should anticipate multiples in the software-as-a-service sector to reach historical norms, however, That’s because subscription-based businesses are able to increase their margins and create greater free cash flow since they earn healthy recurring revenues via subscription-based models. To put it another way, some of the high values in this sector are justified. Many software businesses are expected to post solid results for the fourth quarter, which will likely confirm these positive trends even further.