Tumbling tech titans

tech stocks

Call it the Trump thump.

While the overall market has rallied smartly following the election of Donald Trump, tech stocks have stumbled.

The so-called bellwether FANG stocks–Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL)–have taken a beating since election day.

 

tech-stocks

Bloomberg: Facebook (FB)

 

 

Market Pain

The market swoon has been widespread in the tech world.

The tech-laden Nasdaq Composite Index, up 5.7% year-to-date as of November 15, is underperforming the broader market.

The S&P 500 Index has advanced 6.5% over the same period.

On top of that, the volume of bearish tech stock options has surged, according to the Wall Street Journal.

 

tech-stocks

Source: WSJ

 

Visa Headaches

There are two competing theories about why tech stocks have taken a hit.

First, the incoming Trump administration is expected to take a tough stance on trade and immigration.

The tech industry needs visas to import software programmers, engineers and other skilled foreign workers from abroad.

If Washington clamps down on H-1B visas, that’s bad news for tech companies, in my opinion.

 

Valuations

Then, there are the relatively rich valuations of tech stocks that were a cause for investor concern even before Trump’s upset victory.

As of November 8, the 12-month trailing price/earnings ratio for the S&P 500 tech sector was 20, compared with 18 for the S&P 500.

 

Takeaway

So far, in my opinion, the Trump era hasn’t been kind to tech stocks.

The prospect of tighter immigration policies could be a big negative for the industry even as tech stocks are sporting high valuations.

 
Photo Credit: Claudio Toledo via Flickr Creative Commons