The Nasdaq has posted its worst week since the start of the pandemic, wiping billions from the wealth of tech billionaires, and Bitcoin is down nearly half from its peak level.
The sell-off comes as investors try to decrease risk ahead of a key Federal Reserve policy meeting next week, amid fears over how aggressively the central bank will move to raise interest rates.
But for some it marked the early sign of a markets doomsday. British investor Jeremy Grantham, a notorious life-long bear who persistently declares corrections are imminent, this week claimed that the US is in an asset ‘superbubble’ that will soon collapse spectacularly.
With investors expecting the Fed to begin raising rates as soon as its March policy meeting, shares in pricey tech companies and other expensive growth stocks have started to look relatively less attractive.
Telsa CEO Elon Musk saw his net worth drop $25.1 billion, or more than 9 percent, on the week as a sell-off in the tech sector sent the Nasdaq to its worst week since the pandemic onset
The tech-heavy Nasdaq is down 14.3 percent from the record high set on November 19, and has fallen for four straight weeks and is now more than 10 percent below its most recent high, putting it in what Wall Street considers a market correction.
And the benchmark S&P 500 has now slipped three straight weeks to start the year.
It fell 5.7 percent this week, its worst weekly decline since March of 2020 when the pandemic sent stocks into a bear market.
‘As always, once the volatility starts, investors pile on exacerbating the downward volatility,’ said Nancy Tengler, CEO of Laffer Tengler Investments.
The tech sell-off has hit the nation’s top tech billionaires hard, with Elon Musk, Jeff Bezos, Larry Page, Bill Gates and Mark Zuckerberg losing a collective $67 billion in the past week.
Telsa CEO Musk took the biggest hit, with his net worth dropping $25.1 billion, or more than 9 percent, on the week, according to the Bloomberg Billionaires Index.
A TV broadcasts stock market news in front of the Nasdaq MarketSite in New York on Friday. With the worst start of a year in more than a decade and a $2.2 trillion wipeout in market value, the Nasdaq Composite Index couldn’t have had a messier kickoff to 2022
The tech-heavy Nasdaq is down 14.3 percent from the record high set on November 19
Amazon founder Bezos lost $19.9 billion for the week, and his fortune is now down more than $24 billion since the start of the year.
Meanwhile, Bitcoin dropped again on Saturday and was last down around 4 percent for the day, hovering around the $35,000 level.
Bitcoin, the world’s biggest and best-known cryptocurrency, is now about half its $69,000 peak in November.
It was last at $35,049, after falling as low as $34,000 and following a steep fall on Friday.
The currency has had wild price swings and has been hit as risk appetite has fallen on inflation fears and anticipation of a more aggressive pace of interest rate hikes from the U.S. Federal Reserve.
Other risk assets have fallen with stocks falling on Friday. The S&P 500 and Nasdaq recorded their biggest weekly percentage drops since the start of the pandemic in March 2020.
In a research note on Friday, Edward Moya, senior market analyst for the Americas at OANDA, said bitcoin was falling as ‘crypto traders de-risk portfolios following the bloodbath in stocks’ and in advance of next week’s Federal Reserve policy meeting.
‘Bitcoin remains in the danger zone and if $37,000 breaks, there is not much support until the $30,000 level,’ Moya wrote on Friday.
Bitcoin, the world’s biggest and best-known cryptocurrency, is now about half its $69,000 peak in November
Ether, the coin linked to the ethereum blockchain network, dropped 6.7 percent to $2,396 on Saturday.
While seemingly unrelated to equities, cryptocurrency markets have increasingly begun to correlate with the stock market, as more institutional investors enter the space.
Inflation fears and concerns about the impact of higher interest rates have prompted a shift in the broader stock market after a solid year of gains in 2021.
Technology stocks and consumer-focused companies have fallen out of favor.
Energy is the only S&P 500 sector showing a gain; household good makers and utilities, which are typically considered less-risky investments, held up better than the rest of the market.
Supply chain problems and higher raw materials costs have prompted companies in a wide range of industries to raise prices on finished goods.
Many of those companies have warned investors that their profit margins and operations continue feeling the pinch in 2022.
The S&P fell 5.7 percent this week, its worst weekly decline since March of 2020 when the pandemic sent stocks into a bear market
Grantham claims that US markets are in a ‘superbubble’ which could soon pop. He warned that the US markets could lose $35 trillion in value once the Fed raises interest rates
Grantham, the British investor some dub a ‘permabear’, claims that markets have been artificially propped up by government stimulus and will soon collapse.
Grantham published a paper claiming the market could lose a total $35 trillion in value should stocks, bonds real estate and commodities return to historical norms in 2022.
British bear Jeremy Grantham sees a huge market collapse
He said that while the markets suffered at the start of the COVID pandemic, the Federal Reserves guidelines rallied them with lower interest rates, making the markets unflinching to any outside force as he dubbed it ‘the vampire bull market.’
The bull market is used to describe when prices are on the rise for a fixed period of time.
‘You stab it with COVID, you shoot it with the end of QE [quantitative easing] and the promise of higher rates, and you poison it with unexpected inflation… and still the creature flies,’ Grantham wrote.
That is ‘until, just as you’re beginning to think the thing is completely immortal, it finally, and perhaps a little anticlimactically, keels over and dies.’
Grantham blamed the Federal Reserve and other financial authorities for creating the ‘superbubble’ during the pandemic by lowering interest rates, influencing mortgage rates and creating a ‘judiciously overstated view of our real wealth.’