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In a turbulent year for the markets, we are seeing technology stocks hit hard with big drops in prices. It is normal for these types of shares to suffer more since, due to their fast growth, they are considered risky assets. With inflation showing signs of slowing down, but also with the threat of an economic recession, there are still many unknowns to clear up.
In a note released to his clients J.P. Morgan has stated that prices are too low:
"An average investor expects an economic disaster, and if that doesn't materialize, risky asset classes could recover most of their losses from the first half of the year"
I think that the threat of economic recession is still very strong and we should wait for the next measures taken by the central banks. If inflation shows signs of easing, increases in interest rates may also be more controlled and that would help not to slow down the economy even more.
Unfortunately, demand needs to be destroyed so that prices not only stop rising but start falling. If people can't buy a new cell phone when they need it or change their car when it's old, two things will happen. One is that a stock will accumulate in department stores and other points of sale, and that would cause a drop in prices if it continues over time. The other thing that is going to happen is that the points of sale will begin to reduce their orders to the factories, which in turn would have two consequences. The first is probably job destruction. The second is that the factories would demand fewer raw materials to produce less and the prices of oil, aluminum, and many other raw materials would also fall.
So much destruction of demand and employment is a clear economic recession, so the JPM statement seems too optimistic to me. We must also take into account that the times in modern markets are different from those of previous stages since everything moves much faster. . The recession seems inevitable to me but I also believe that the necessary measures are being taken to have a soft landing.
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