After a nice upward move on the day of the Fed rate hike, the market retreated sharply in three subsequent sessions. The sell-off is not over yet, according to Redpoint Ventures.
Fall
Between Wednesday and Monday, the SPDR S&P 500 ETF Trust lost more than 7 percent. The weakness is even more acute when we consider the all-time high reached late last year. Since hitting a high of 473.54, SPY has stopped at approximately 16 percent.
Future ‘Tense’ for the Market
The market could drop “somewhat” more despite software stocks falling from their recent highs, venture capitalist Tomasz Tunguz said in his weekly newsletter.
If returned in 2017, the most expensive stock would be Veeva Systems, Inc. and then exchanges it for 11.7 times the forward multiple, he says.
Cloudflare, Inc. currently has the highest value at 22.2 times, he said. If the appreciation environment reflects the situation, Cloudflare could see the multiple halves again, he added.
A typical company traded 5.4 times in bulk in 2017 compared to 7.93 times currently, Tunguz said.
Fastest Growers Could Be Worst Hit: Tunguz said the total basket of software stocks is in the same volume as in 2017. Some of them like ServiceNow, Inc., and Five9, Inc. rose, while Wix.com Ltd., New Fall Relic, Inc., and 2U, Inc., he added.
“High flyers have increased distribution at the upper end of the market,” says the author of “Winning with Data”.
If the multiples compress further, the top quartile — the fastest growers — will carry the hardest, he warns.
“The market can continue to have a stock and never reach zero,” Tunguz said.
By Shanthi Rexaline
© 2022 The Epoch Times. The Epoch Times does not provide investment advice. All rights reserved.
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