What do the falling share prices mean?
Share prices on many stock markets around the world plummeted on Monday. Technology companies were particularly affected. Apple shares momentarily dipped by up to ten percent and Microsoft and Alphabet shares dropped by around five percent. The Japanese Nikkei index experienced its worst crash in decades. Commentators are at odds over how worried we should be.
Menacing concentration of big tech
Corriere della Sera observes:
“With the enormous growth of American big tech in recent years, which in turn is linked to the digital revolution, artificial intelligence and the e-mobility revolution, the stock markets have gradually become incredibly concentrated. Never before have so few companies had such an impact on the overall value of the global markets. Taken together, Apple, Microsoft, Nvidia, Alphabet (Google), Amazon, Meta (Facebook) and Tesla - in order of capitalisation - are now worth over 13 trillion dollars. Of course, we should be wary of making inappropriate comparisons. But that is more than the Eurozone's gross national product for a year.”
Crisis as an opportunity
This is no time for panicking, La Libre Belgique warns:
“Such corrections are perfectly normal in a healthy market. ... Especially since the extraordinary stock market performances of the seven big tech stars (Apple, Meta, Google, Amazon, Microsoft, Nvidia and Tesla) have inflated the stock indices in recent months. So much so that they have distorted the reality of the financial markets, leading to today's unprecedented volatility. ... The current instability, the outcome of which naturally remains to be seen, may offer investors good opportunities to readjust their positions.”
Late realisation hits stock markets hard
In Handelblatt's opinion the crash could have come much earlier:
“The list of uncertainty factors is as long as it is frightening: the epochal return of inflation, the desperate and almost impossible balancing act of the central banks to combat this with strong interest rate hikes without driving economies into recession, the rapid rise in national debt almost everywhere and, finally, the geopolitical risks surrounding the Middle East conflict, the war in Ukraine and the threat of an invasion of Taiwan. The stock markets have seemed to ignore all of this for many years. ... Apparently, however, this assessment has changed, albeit rather belatedly, which is why the stock markets are now being hit with such force.”
Signs point to recession
Jornal Económico sees oil prices as an indication of where things are heading:
“All indicators point to a slowdown of the global economy. ... It makes no sense that the price of a barrel of oil is falling in the current context of instability in the Middle East and the state of affairs in Venezuela. The market's reaction should be the opposite, driving prices up instead. The reason for the fall in prices is simple: the global economy is slowing down and this is reducing global demand for oil.”
The US at the epicentre
Posta sees the meltdown as a result of the US interest rate policy:
“The Fed wants to maintain high interest rates in order to control inflation. However, this leaves the US economy facing the threat of recession because due to high interest rates new investments can't boost employment and other political and social effects are to be feared. A recession in the US would pose a major threat and risk to the global economy, especially the Japanese and European economies. The high interest rates are having an inhibiting effect on investments, particularly in sectors such as the construction industry.”