Six charts that show speculation draining out across various asset classes
For those concerned that the decade-long super-easy monetary policy has created asset bubbles around the world, the first signs of trouble may be in the making for inflated markets.
To Bank of America strategists, a bubble is "simultaneously popping" in assets including cryptocurrencies, palladium, long-duration technology stocks, and other historically risky areas of the market.
The winding down in speculative areas comes as investors brace for the U.S. Federal Reserve to pick up the pace of policy tightening.
The winding down in speculative areas comes as investors brace for the U.S. Federal Reserve to pick up the pace of policy tightening.
Here's six charts that show speculation draining out across various asset classes:
1. $ARK Innovation ETF(ARKK.US$ has fallen roughly 46% from its record high in February 2021. The hawkish signal from the Fed has hit expensively valued technology names hard, and many of those, including $Tesla(TSLA.US$ and $Roku Inc(ROKU.US$, dominate Ark's funds.
1. $ARK Innovation ETF(ARKK.US$ has fallen roughly 46% from its record high in February 2021. The hawkish signal from the Fed has hit expensively valued technology names hard, and many of those, including $Tesla(TSLA.US$ and $Roku Inc(ROKU.US$, dominate Ark's funds.
2. Speculation is also being drained from other riskier corners of the equity markets. A basket of unprofitable tech stocks has tumbled after a years-long run-up while an index tracking SPACs is down 35% from its highs.
3. The Nasdaq Biotech index, which includes companies like $Amgen(AMGN.US$ and $Gilead Sciences(GILD.US$, lost 6.5% in the first week of the new year, its worst five-day stretch since mid-March of 2020.
4. Meanwhile, the $Invesco Solar ETF(TAN.US$, saw an outflow of more than $70 million Thursday, the biggest since March of last year. The fund, which in 2020 posted a more than 230% gain, has lost its luster in recent days, as the Fed turns more hawkish.
5. Cryptocurrencies haven't been spared from the speculative wash-out. Bitcoin had fallen about 40% as of late Friday after hitting a record high of nearly $69,000 in November. Ether was down about 35% from its November highs.
6. The weakness in technology and cryptocurrency is a double whammy for an exchange-traded fund that focuses on both of those industries: the $Global X FinTech ETF(03185.HK$. The fund- -- which holds both upstart technology firms including $Affirm Holdings(AFRM.US$ and crypto-related companies like $Coinbase(COIN.US$-- has dropped 30% since hitting a record in October.
Source: Bloomberg
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