What we’re reading (2/6)
“Facebook’s Faceplant On Wall Street Could Be Just The Beginning For Some Tech Stocks” (Washington Post). “Both the Fed and the International Monetary Fund warned in recent months that stock prices could be losing touch with their fundamental values. Relative to earnings forecasts, prices were at ‘the upper end’ of historical experience, the Fed said in November, adding: ‘Asset prices may be vulnerable to significant declines should risk appetite fall.’ Higher interest rates hurt companies with lofty stock prices based on the expectation of dramatic earnings growth years in the future, such as the high-tech favorites that dazzled Wall Street over the past two years.”
“A Big Tech Trade Is Losing Its Luster” (Wall Street Journal). “Gone, several investors said, are the days in which the stocks logged a simultaneous ascent and attracted crowds of fans. Some have become victims of rising interest rates, changing consumer tastes and stretched valuations. Those that have fallen short of high investor expectations have paid dearly in the market.”
“Why There’s No Need To Fear A Bear Market” (CNN Business). “[A] correction doesn't necessarily mean that an even worse pullback is coming. Few analysts are predicting a long, painful bear market ahead. That's when stocks drop more than 20% from recent highs.”
“The SEC Is Tightening Its Grip on Private Markets — But It May Be Disappointed” (Institutional Investor). “The SEC is concerned about two types of potential systemic risks from hedge funds — sales of distressed assets and the possibility that one fund’s problems could be transmitted to other parties, such as prime brokers, according to Mark Perlow, partner at law firm Dechert. There hasn’t been the same clarity on PE risks. ‘Even if these risks were valid, the SEC statements in the release were not able to articulate anything close to this for private equity funds,’ he said.”
“Archegos Cited In U.S. Watchdogs’ Warning About Hedge Fund Risks” (Bloomberg). “The Financial Stability Oversight Council -- a panel of top U.S. financial regulators that includes Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and Securities and Exchange Commission Chair Gary Gensler -- agreed Friday to support ‘an interagency risk monitoring system to identify potential emerging financial stability risks posed by hedge funds’ and to consider options for dealing with the dangers as they arise.”
