What happened
Shares of Meta Platforms (META -4.71%), Amazon (AMZN -4.40%), and Apple (AAPL -3.52%) were all plummeting this morning following the Federal Reserve’s decision to raise the federal funds rate by 75 basis points yesterday.
The tech-heavy Nasdaq Composite fell 3.7% this morning, and the tech giants followed suit, with Meta losing 4.8%, Amazon down 4.2%, and Apple falling 3.5%.
So what
The Fed is laser focused on bringing down inflation, which is at a 40-year high, but investors across all sectors are worried that aggressive rate hikes will slow the economy down too much and potentially even cause a recession.
Image source: Getty Images.
Those fears were magnified after the Fed’s significant interest rate increase yesterday, which was its largest rate increase since 1994.
After an initial positive response to the rate hike in yesterday’s afternoon trading, investors are now growing increasingly concerned that the Federal Reserve will have to continue making elevated rate hikes throughout this year in order to tame inflation.
Meta, Amazon, and Apple investors may be latching on to comments made by Fed chairman Jerome Powell, who said yesterday that “from the perspective of today, either a 50-basis-point or a 75-basis-point increase seems most likely at our next meeting.” Though Powell said he doesn’t expect 75-basis-point hikes to be common.
While stocks across all sectors have fallen lately, technology stocks have especially taken it on the chin as some investors flee high-growth investments and look for safer places to put their money.
Meta, Amazon, and Apple investors, in particular, are likely worried that a potentially slowing economy could hurt Meta’s advertising business, while Amazon and Apple shareholders may be focusing on supply chain problems, rising material and shipping costs, and the potential for consumer demand for products to slow down in the months ahead.
Now what
While Meta, Amazon, and Apple shareholders are right to keep a close eye on the Fed’s moves and consider how the rake hikes could affect the economy, they should also try to keep a long-term perspective on their investments.
All of these companies have plenty of cash on hand to weather an economic storm, and they’ve already proved that they can withstand uncertain circumstances and adjust some of their business strategies, as they had to during the height of the pandemic.
That doesn’t mean that the stocks Meta, Amazon, and Apple won’t have more turbulent times ahead, but it’s worth remembering that keeping a five-year timeline (or longer) on your investments is the best way to keep yourself from overreacting while others are panicking.
