![dominoes falling dominoes falling](https://media.sciencephoto.com/image/c0019947/800wm/C0019947-Falling_dominoes.jpg)
After all, the developed countries seem to be early in their economic cycles, rather than late. But it’s difficult to foresee what could torpedo the operations of the major growth companies such as ( AMZN), Apple ( AAPL), or Microsoft ( MSFT). Of course, as Yogi Berra perhaps said, it’s tough to make predictions, especially about the future.
![dominoes falling dominoes falling](https://thumbs.dreamstime.com/b/falling-dominoes-domino-effect-game-127579712.jpg)
Today’s blue chips do not appear to face a similar future. From February 2000 through February 2002, the earnings reported by the companies in the Morningstar U.S. The other half was eroding profitability. Although the 2000-02 technology downturn is largely remembered today as being the inevitable outcome of an investment frenzy, the valuations were only half the story. That depends heavily upon corporate earnings. The critical question, of course, is whether this month’s carnage completes the process or merely jump-starts it.
![dominoes falling dominoes falling](https://static.coindesk.com/wp-content/uploads/2017/11/Dominoes.jpg)
Shortly thereafter, blue-chip growth stocks also turned belly-up.Īs they have since done. The last time small-growth companies so badly trailed other stocks, he points out, was early 2000. Noting that that the small-growth indexes were drooping, with the most aggressive of such indexes performing the worst, John wondered whether such behavior was the proverbial canary in the coal mine. 5 of this year, my former Morningstar colleague John Coumarianos published a highly prescient article. The fund’s cumulative drop is 49%.) This time, however, large-growth stocks slid along with their small-growth rivals. Fortunately for the fund’s shareholders, the math works otherwise. (If you sum the losses for the fund that appear in this article’s three charts, the total loss is 65%. From the new year through this past Wednesday, large-growth companies have joined the party. This year we are seeing a third domino: large-growth stocks. The following chart omits SPACs and meme stocks, for which I possess no index data, but it does depict how ARKK fared from late January through early November 2021 against other stock-market segments.
![dominoes falling dominoes falling](https://ak.picdn.net/shutterstock/videos/1027882802/thumb/1.jpg)
And when other stocks continued to rise, the speculations slipped. In a word, those investments were speculations-the stock market’s chanciest securities. The common link shared by SPACs, meme stocks, and the companies owned by ARKK was abundant hope for the future accompanied by negligible (or nonexistent) current earnings. From February through September of 2021, reported Goldman Sachs, an index of SPACs trailed the S&P 500 by 49 percentage points. Although new SPACs continue to be launched, most notably Digital World Acquisition Corporation ( DWAC) (covered last week in this space), SPACs that completed corporate mergers have crumbled over the over the past year. (AMC Entertainment ( AMC) lasted for a few more months, but it too subsided.) A slew of recent articles have buried meme-stock investing, but the truth is that those securities have long been dead on their feet.Īlso struggling have been s pecial-purpose acquisition companies, or SPACs. Bed, Bath, & Beyond ( BBBY), Peloton Interactive ( PTON), and most notably GameStop ( GME), posted their all-time highs in January. As with ARKK, those stocks started 2021 with a bang but quickly fizzled. Based largely on social-media enthusiasm, such issues boomed during late 2020. The same week also marked the top for meme stocks.
DOMINOES FALLING FULL
Manager Cathie Wood would garner further headlines, but the fund has been retreating for a full year now. The most celebrated fund of the previous year, having scored a 156% return, ARKK began 2021 where it had left off. The first domino to topple was ARK Innovation ETF ( ARKK).