Stock market ‘superbubble’ bursts as Facebook falls – but ‘boring’ British shares are BACK

Interactive Investor expert discusses hike in interest rates

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US technology shares have been stock market heroes for the past decade, as Amazon, Apple, Microsoft and Google-owner Alphabet made history by becoming the world’s first trillion-dollar companies. Yet analysts now fear they are overvalued and vulnerable to a crash.

Veteran hedge fund manager Jeremy Grantham has warned that the US is in the midst of only its fourth “superbubble” of the last 100 years.

The other superbubbles burst in 1929, 2000 and 2008, and the latest one may trigger one of the biggest stock market crashes ever, he has warned.

January marks the worst start to a year for stock market since 2016, with the US Nasdaq index falling 15.6 per cent, while electric car maker Tesla fell around 25 per cent.

Last week, shares in social media giant Facebook (now renamed Meta) crashed by a quarter, knocking an incredible $230 billion off its market cap in a single day.

That is the biggest one-day loss in history for a US company, a sum bigger than any single FTSE 100 company.

Hot US tech stocks that benefited from the Covid lockdowns are worst hit, said James Yardley, senior research analyst at Chelsea Financial Services.

Home exercise bike specialist Peloton, video calls service Zoom, virtual healthcare specialist Teledoc and retail trading app Robinhood are all down three quarters or more over a year.

TV streaming platform Roku and MRNA vaccine maker Moderna have fallen roughly two thirds, Mr Yardley says. “There is a lot of pain out there right now.”

Stock markets are having a rollercoaster ride, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “Inflation is looming ever larger with the cost of living squeeze intensifying as energy prices soar.”

Facebook’s drop shows how nervous tech investors are right now, she added. “It also reflects the astronomical gains the tech giants made during the pandemic.”

Retail giant Amazon’s results were better received but one surprise corner of the global stock market is finally swinging back into fashion after years of underperformance.

Global investors reckon British shares are cheap and offer terrific value right now. The FTSE 100 is up 15 percent over the past 12 months, rising almost 1,000 points to 7,516 in that time.

Unfashionable companies like Lloyds Banking Group and oil giant BP are now more popular than whizzy US growth stocks, said Dan Lane, senior analyst at Freetrade. “The UK is back on the menu and there is growing appetite for our lowly-valued market.”

The share prices of FTSE 100 banks Lloyds and Barclays have climbed by around 40 percent over the past 12 months.

Last week’s Bank of England base rate hike will boost banking profits by increasing their net interest margins, the difference between what they pay depositors and charge borrowers.

As the oil price soars, the BP share price is up 60 percent over the last year. Oil giant Shell’s share price is up 55 percent.

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The UK recovery is good news for older investors looking to generate steady dividends and growth, Lane said.

Further stock market volatility is likely but investors should sit tight rather than panic, said Jason Hollands, managing director at Tilney Investment Management Services. “Never let emotions take control when the sky appears to be falling in.”

Mr Hollands suggests viewing your portfolio to check your money is in the right place before the next crash arrives. “Ditching shares and trying to reorganise a portfolio in the midst of a period of turbulence is a little bit like trying to change an aircraft engine mid-flight.”

Don’t panic and sell in a crash. “The worst days for the markets and often followed by the best days,” Mr Hollands says.

Brave investors may see a crash as a buying opportunity, he added. “Bear markets are typically a fantastic opportunity to pick up shares on the cheap.”

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