Missing the Forest for the Trees in the Early Months of a Long-Term Bear Market

Big technology stocks are in the midst of their biggest rout in more than a decade. Some investors, haunted by the 2000 dot-com bust, are bracing for bigger losses ahead. The S&P 500’s information-technology sector has dropped 20% in 2022 through Wednesday, its worst start to a year since 2002. Its gap with the broader S&P 500, which is down 14%, is the largest since 2004.

For years, shares of tech companies propelled the stock market higher, pushing major indexes to dozens of records. Excitement for everything from cloud-computing to software and social media drove an epic runup in far-reaching corners of the market. More recently, the Federal Reserve’s accommodative policies at the start of the Covid-19 pandemic fueled a seemingly insatiable appetite for risky bets.

This year, investors are faced with a starkly different environment. Treasury yields have jumped to the highest level since 2018 while bond prices have fallen. Many of the trends that flourished over the past two years—including bullish options trades, special-purpose acquisition companies and cryptocurrencies—have made a sharp U-turn. This year, individual tech stocks have recorded some of their sharpest-ever falls, with hundreds of billions of dollars in market value evaporating—sometimes within hours...

- The Wall Street Journal, June 8, 2022

This is part 1 of Volume I Issue VI of the Macro Value Monitor, a publication focusing on Monetary History, Market Myths, Investing Legends, and Real Global Value. Part 2 of June’s issue, In Memoriam: Transitory, and There Is No Alternative, is available on Substack.

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On June 5th, 1931, a young lawyer in Ohio began recording in a diary what he was witnessing in his hometown of Youngstown, and throughout the country. By that time, it had become clear to him that he was living though a major financial crisis – the first real financial crisis of his life. In the midst of increasing signs that the downturn was defying optimistic expectations and sinking to new depths a year and a half after the market crash in October 1929, he wanted to begin recording his daily observations on paper, so that he might learn as much as he could about the economy, the financial markets, and government policies as events unfolded.