Double Trouble

Tech stocks are plummeting, and interest rates are rising.

Any correlation? We will get to that shortly.

For now, what tech stocks should you own, and how much?

Last week, Meta’s (Facebook) earnings surprise provoked the largest single day market drop ever by a U.S. company.

One day later, Amazon’s earnings surprise spurred the largest market gain ever by a U.S. company.

Time to sell Meta and buy Amazon? Maybe, maybe not.

Are you sure you want to own a company (Amazon) that increased barely 3% in 2021, while the S&P 500 Index gained over 25%?

Now let’s talk double trouble.

There is a correlation between tech stocks and interest rates.

Higher bond yields simply reduce the value of a company’s future earnings in today’s dollars. With bond yields at their highest since 2019, it is no wonder the new year is starting with the tech sector getting hammered.

Now take a moment and read comments by Vanguard’s Global Chief Economist Joe Davis, as he explains the weighty task on the Fed to raise rates and keep inflation in check.

Are you unknowingly placing big bets in your portfolio in both your stock and bond holdings? Does the sustainability of your portfolio depend on these big bets?

Maybe it is time to reconsider diversification in your portfolio. Maybe it is time to own Facebook and Amazon in a way that appeals, not to your greed, but to your common sense.

Maybe it is time to implement a Coffeehouse Investor portfolio.
 
If you want to build a portfolio that addresses rising interest rates, taxes, and market fluctuations, let's connect and build a plan for the future.