How the stock market carnage of 2022 wiped $5.2 trillion of value from these tech heavyweights

It is a December that few will remember.

Stocks were headed for a losing month, and reinforcing a central theme of the 2022 stock selloff, former top executives from the pandemic felt the worst of the pain.

Analysts at Bespoke Investment Group looked in a Wednesday note at the stocks that make up the New York Stock Exchange’s FANG+ index, which aims to track the 10 most traded tech giants.

They noted that Inc. AMZN,
On Tuesday, the third component of the megacap index, along with Facebook’s parent company Meta Platforms Inc. META,
and Netflix Inc. nflx,
to end below its lowest level since the March 2020 COVID crash. In other words, the trio erased its stratospheric post-COVID crash gains.

Tailor-made investment group

The above chart shows that the 10 index constituents entered the year with a combined market capitalization of $12.3 trillion and were on track to end the year with a combined market capitalization of just over $7 trillion, analysts said.

While Apple Inc. AAPL,
fell the least since the start of the year in terms of share price changes, it lost the most in market value at $844 billion. Amazon saw its market capitalization drop to second place at $843 billion, nearly halved. Tesla Inc. TSLA,
along with Amazon, is one of two names to be kicked out of the “$1 trillion market cap” club this year.

As for the FANG+ index, it peaked in early November last year and has fallen 46% since then, Bespoke noted. The decline, analysts observed, follows a failed break above the top of its downtrend channel recently, with the index now back within 5% of last November’s low. On a relative basis, the group has underperformed the broader market for even longer, peaking in February last year, they noted.

The aggressive pace of rate hikes by the Federal Reserve in 2022 has pushed up US Treasury yields. This is largely responsible for this year’s stock market carnage, especially for the megacap growth stocks that make up the FANG+ index. Growth stocks, whose high valuations were based on expectations of strong long-term earnings and cash flow, are particularly sensitive to rising interest rates. When government interest rates rise, the value of this future earnings is discounted more heavily.

The high-tech Nasdaq Composite COMP,
had fallen about 10.5% so far this month, putting it on track for its worst December performance on record. The Nasdaq has fallen more than 34% since the start of the year.

S&P 500 SPX,
was on course for a 6.8% decline in December and was down more than 20% year-to-date, on track for its worst annual performance since 2008. The Dow Jones Industrial Average DJIA , less focused on growth,
held better, down 4.4% in December and on track for a 9% drop in 2022.

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