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Are U.S. Big Tech Stocks Following In The Footsteps Of Their Chinese Counterparts?

By Jesse FelderStock MarketsJan 27, 2022 02:12AM ET
www.investing.com/analysis/are-us-big-tech-stocks-following-in-the-footsteps-of-their-chinese-counterparts-200616118
Are U.S. Big Tech Stocks Following In The Footsteps Of Their Chinese Counterparts?
By Jesse Felder   |  Jan 27, 2022 02:12AM ET
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In a year filled with notable market phenomena, one of the more notable of 2021 was the dramatic divergence between US and Chinese tech stocks. While the former consistently surged to set new highs the latter crashed, giving back all of its gains since the onset of the pandemic and then some.

US Tech vs China Tech
US Tech vs China Tech

The popular reasoning for the crash in the Golden Dragon China Index (HXC) argues that the Chinese government crackdown on many internet-based businesses was responsible for a major reset in the valuations of the associated equities. While this may be true to some extent, it is also true that the downturn in the Chinese credit cycle may have played a major role, as well.

China Tech Stocks And The Credit Cycle
China Tech Stocks And The Credit Cycle

It is also true that there is now bipartisan support in Washington for a crackdown on Big Tech here in the US. Of course, it won’t look exactly the same as China’s crackdown but the impetus for both is very similar if not identical.

However, just as for China’s tech stocks, a major shift in monetary policy may be even more ominous for the valuations of US tech stocks as represented by the NASDAQ 100 Index (NDX).

US Tech Stocks And Money Printing
US Tech Stocks And Money Printing

In fact, more than anything else, the expected future direction of the Fed’s balance sheet may help to explain the recent weakness in the stock market which has been led by the tech sector. And if the Fed follows through with its “forward guidance” in this regard, the valuation reset in big tech stocks may be only just beginning.

Are U.S. Big Tech Stocks Following In The Footsteps Of Their Chinese Counterparts?
 

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Are U.S. Big Tech Stocks Following In The Footsteps Of Their Chinese Counterparts?

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Comments (1)
bert prince
bert prince Jan 27, 2022 4:01AM ET
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yep the analogy is good. fed wants to deflate, government are tweaking rax rules and ndx 10% down is nothing
 
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