Will you change your investment view as a result of Facebooks big slump

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In our economic briefing on Wednesday evening, (Australian time), with Chris Watling from Longview Economics in London, few observations are now ringing true. Chris predicted that the technology sector was in for a shock as investors started to “take some money off the table and sit on the sidelines for a while”. He said he expects investors to jump back into the market during the second half of 2022. Chris still thinks that this year will be a very positive year for shares markets.

Chris Watling predicted this correction in this interview on CNBS.

Facebook committed the most basic marketing mistake; they changed their name which affected brand recognition!

Meta Platforms Inc.’s one-day crash now ranks as the worst in stock-market history. The Facebook parent plunged 26% on the back of woeful earnings results, and erased about $251.3 billion in market value. That’s the biggest wipeout in market value for any U.S. company ever.

FACEBOOK HAS BEEN “ON THE NOSE” FOR A FEW YEARS BUT WE HAVEN’T NOTICED.

Compare the performance of Meta (Facebook) against Tesla, Microsoft and Apple over the last 5 years.

What does this mean for our investor clients?

In our model portfolios, the allocation to the Nasdaq index ETF  is up to 10% of the overall portfolio allocation and within the index only 4.8% of the portfolio was allocated to Facebook as at the end of December 2021. For most investors, the impact on their portfolio will be moderate. However, this market shock reveals a growing trend in global asset allocation towards value companies that have consistent and predicable earnings. Some very famous technology companies are trading on 30 times earnings and given how developed their businesses are, and what a massive market share they have, it’s going to be really, really challenging for those companies to continue to grow profits at a rate that justifies the multiple. We expect a move back to value stocks and a reallocation away from the U.S over the remainder of 2022.

Take a look at some other big tech brands who have also had major slumps

Most of these companies have recovered quite well after the slump and provided investors with handsome returns.

The mantra of asset allocation has never been more evident that this week. In the Nasdaq NDQ ETF that forms a part of our portfolios, Facebook has an allocation of only 4.8% of the total portfolio.

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By |2022-02-05T07:34:45+00:00February 4th, 2022|