Understanding the Tech Correction

By Zack Pelosky

Stock market charts. (via IMD.org)

Year to Date, Technology, Entertainment, and Communications have been subject to an astonishing bear correction; The Morningstar US Technology Index is down over 27 percent YTD, led by America’s largest companies such as Microsoft (-22% YTD), Apple (-17% YTD), Nvidia (-44% YTD) suffering double-digit losses. Macroeconomic headwinds have proved disastrous for FY 2022 as the war in Ukraine, Chinese lockdowns, and the end of the Coronavirus lockdowns in America—enabling less reliance on technology—have resulted in a cancerous Bear Market Sentiment. Technology has shed over $1 trillion in valuation, but the end is in sight. As inflation starts to settle and the impact of the lockdowns and war have been factored into share prices, American Technology is spring-loaded for a historic uptrend.

Let's look at why there is already a Bear Market Sentiment in the Tech sector specifically. Firstly, there are lingering rumors that most companies remained afloat because of the free money (Endless bailouts) period during COVID. Hundreds of Fortune 500 companies, many of which are tech companies, are running on negative EBITDA and little liquidity. Therefore, even the most and usually negligible financial strain could prove disastrous without future government aid. And, as elections are nearly over, government officials are likely to end the prolonging of natural correction. However, considering natural corrections have been put off for years, Market sentiment points towards aggressive recession to depression.

In the E.E.F.B. section for this issue of The Iris, we’ll produce two stock choices; We predict PayPal and Adobe will lead this recovery. Both companies are critically underpriced and have, or will soon have, positive market sentiment, which is imperative for a solid comeback.