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<blockquote data-quote="Jaysen" data-source="post: 3088" data-attributes="member: 1"><p>Great questions.</p><p></p><p>1. That's a good way to put it. There's a few things you can point to. The longer the trade war goes on, the more investors become jittery and risk averse: will China devalue its currency? Will Trump continue with more tariffs? Will there be more investigations into Chinese investments? So investors move out of tech stocks into safer assets. Investors might rotate into finance stocks, for example, which will benefit from the higher interest rates. Or they could buy assets less exposed to China.</p><p></p><p>If we're talking about -- why tech stocks now? With higher interest rates and the rise of yields on 10-year treasuries, investing in stocks comes at a higher opportunity cost compared to the low risk government bonds. The money being pulled out of stocks hits tech companies more because they have been the ones to gain the most over the last few years from a low interest rate environment. Now that interest rates are rising, this might not continue. There's also the higher borrowing costs and the impact on valuations.</p><p></p><p>2. Yes, I agree. It's not the trigger, but once tech stocks started going down, nervous investors accelerated the sell-off.</p></blockquote><p></p>
[QUOTE="Jaysen, post: 3088, member: 1"] Great questions. 1. That's a good way to put it. There's a few things you can point to. The longer the trade war goes on, the more investors become jittery and risk averse: will China devalue its currency? Will Trump continue with more tariffs? Will there be more investigations into Chinese investments? So investors move out of tech stocks into safer assets. Investors might rotate into finance stocks, for example, which will benefit from the higher interest rates. Or they could buy assets less exposed to China. If we're talking about -- why tech stocks now? With higher interest rates and the rise of yields on 10-year treasuries, investing in stocks comes at a higher opportunity cost compared to the low risk government bonds. The money being pulled out of stocks hits tech companies more because they have been the ones to gain the most over the last few years from a low interest rate environment. Now that interest rates are rising, this might not continue. There's also the higher borrowing costs and the impact on valuations. 2. Yes, I agree. It's not the trigger, but once tech stocks started going down, nervous investors accelerated the sell-off. [/QUOTE]
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