Even the highest flying tech stocks aren’t immune to trade worries: economist

  • Written by MarketWatch
  • Published in Economics

Think the highest-flying tech stocks are immune to trade tensions? As Monday’s market action suggests, it might be time to think again.

In a well-timed Monday note, Ingvild Borgen Gjerde, an economist at Capital Economics, warned clients that while the so-called FAANG stocks — an acronym referring to Facebook Inc. FB, -2.60%[1] Apple Inc. AAPL, -1.37%[2] Amazon.com Inc. AMZN, -3.24%[3] Netflix Inc. NFLX, -6.51%[4]  and Google parent Alphabet Inc. GOOG, -2.55%[5]  — are, on average, less directly affected by rising trade restrictions than U.S. tech firms in general, they are highly cyclical and exposed to a slowdown in growth.

Capital Economics was already looking for growth to slow next year, and Gjerde warned that escalating trade tensions could accelerate the process.

Read: Why a major trade war could mean a ‘full-blown recession’[6]

Tech stocks were certainly feeling the pinch on Monday, with the Nasdaq Composite COMP, -2.05%[7]  dropping 2.5%[8] to lead a Wall Street selloff that left the Dow industrials DJIA, -1.31%[9]  off nearly 500 points at its low. The Dow remains off more than 400 points for a decline of 1.7%, while the S&P 500 SPX, -1.35%[10]  sank 1.8%.

See: Highflying tech stocks hammered by China fears[11]

The tech-led weakness comes as the Trump administration considers efforts to block Chinese investment in the U.S.[12] as well as curbs on technology exports to Beijing. That comes on top of the Trump administration’s threats to impose tariffs on imports of as much as $450 billion in Chinese goods; Beijing has threatened to retaliate.

While fears of a...

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