The single sharpest fact in one or two punchy sentences. Who did what, where, when, and why it matters. Not a summary of everything — the one thing that makes someone stop scrolling. A sharp drop in technology-related shares has left investors reeling, with nearly $US1 trillion ($1.45 trillion) wiped off the value of tech giants like Elon Musk's SpaceX.
The selloff of tech shares started on Thursday, the same day the US Federal Reserve Board's Open Market Committee, chaired by Kevin Warsh, concluded its first meeting.
Warsh's hawkish tone and announcement of five taskforces to review the way the Fed communicates and operates pointed to a more conservative, smaller, less interventionist central bank in future.
Everything that flowed from that meeting and the announcement of Warsh's five taskforces to review the way the Fed communicates and operates pointed to a more conservative, smaller, less interventionist central bank in future.
The rate-setting committee provided a clear message that it was more likely the Fed would raise US interest rates by the end of the year than lower them.
The US 10-year bond yield has been creeping up since Donald Trump regained the presidency last year, but until last week, there was no expectation that the Fed itself would target higher rates.
Bank of America economists who, before the meeting, had been forecasting no rate movements this year are now saying there could be three.
That might be extreme, but it illustrates how abruptly the mood and expectations have shifted.
For the big tech companies, trading on abnormally high multiples of their revenues and earnings, even a modest shift in interest rate expectation has a magnified impact on their valuations.
The worst-hit sector of the market was semiconductor stocks, with the Philadelphia Semiconductor Index plunging almost 8 per cent this week.
The tech-heavy Nasdaq index is down 3.5 per cent since the Fed meeting and the broader S&P 500 just under 2 per cent.
The \"Magnificent Seven\" stocks, which account for more than a third of the US market's capitalisation and have driven the market this decade, with an acceleration as the AI story gained traction and momentum, are down nearly 4 per cent on average in the past few days.
SpaceX, which debuted on the market last week with a market capitalisation of $US2 trillion, a valuation that peaked at $US2.99 trillion, is now valued at $US2 trillion again.
Warsh's plan for a smaller Fed balance sheet that holds fewer bank reserves would pass much of the responsibility and risk of supplying liquidity to markets.
Instead of the \"Greenspan put\" - a conviction borne out of the way the Greenspan Fed intervened to put a floor under financial markets during the Asian financial crisis, the Long-Term Capital Management collapse, the bursting of the dot-com bubble and the 1987 sharemarket crash - markets would have to price risk into asset prices.
Conventionally, investors value companies by discounting their forecast future cash flows by a risk-free rate, which is generally the yield on 10-year government bonds.
The higher that yield, the lower the net present value of those future cash flows.
The maths is conventional; the financing definitely isn't.
Technology stocks, especially AI-related stocks – and most particularly SpaceX, with its stratospheric valuation that capitalises a vision rather than prospective revenues or earnings – are vulnerable to even the hint of a rate rise and even more vulnerable if investors believe the safety nets they’ve relied on for decades may soon be yanked.
The single sharpest fact in one or two punchy sentences. Who did what, where, when, and why it matters. Not a summary of everything — the one thing that makes someone stop scrolling.
A sharp drop in technology-related shares has left investors reeling, with nearly $US1 trillion ($1.45 trillion) wiped off the value of tech giants like Elon Musk's SpaceX.