Tech stock sell-off keeps nervous investors on sidelines

Global markets remain risky after another week of sell-offs in big technology stocks knocked investor confidence.

The tech-heavy Nasdaq lost 0.56 per cent to remain in a technical correction as market participants struggled to recapture the momentum that had propelled global stock market to all-time highs only three-weeks ago. The MSCI World Index declined for the third-successive week, underpinned by
a 0.64 per cent drop in the S&P500.

Despite the decline in equities, sentiment improved with the US VIX (fear) index easing and bolstering the argument the decline in stocks is just a market blowing off froth.

Wall Street tech stocks have copped a beating in the past couple of weeks.
Wall Street tech stocks have copped a beating in the past couple of weeks.Credit:New York Stock Exchange/ AP

Entering into the new trading week, the market is dominated by a sense of uncertainty as investors position for an increasingly risky end to 2020. The US election is shaping as the biggest risk-factor, with the stock market seemingly positioning for a change in President, and the heightened potential that the election result could end up being contested in the courts.


A delay in US fiscal stimulus is also dragging on the outlook as nervousness mounts that a
long-awaited second round of stimulus from the US government will fail to pass into law before the

Escalating tension between the US and China has also rattled the markets after President Trump’s offensive against Chinese-owned TikTok.

In the UK, the risk of hard Brexit intensified after Prime Minister introduced a bill that could complicate trade talks with the European Union.

And of course, the coronavirus pandemic still overhangs the market, as a new wave of lockdowns rolled out in response to another spike in infections in several countries threatens the global economy’s recovery.

These risks, although not new, have resulted in a lack of momentum and led to investors reluctant to take any chances until events play-out.

There’s little to suggest this will lead to another crash in global markets, especially given the ongoing assurances of central banks to support markets. However, risky assets are likely to remain choppy for the rest of the year, with the market needing a big catalyst to see the balance of risks shift back to the upside.

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