Some tech company investors are learning that stocks don’t always rise. In fact, they don’t always rise at all. In the first week of 2022, they dropped a lot.
For the first time since February 2021, the tech-heavy Nasdaq lost 4.5% last week, its worst week since then. And the ARK Innovation ETF, which has a lot of high-growth tech companies in it, lost 11% of its value, too.
What’s going on now? In order to understand what’s happening in the stock market, you also need to look at the bond market. Even though it might not be as exciting, your Robinhood portfolio is being affected by it more than you might think.
Over in the bond market, yields (the amount of money you get back if you buy a bond) are rising. If you bought a 10 year bond on Friday, the yield on the note hit its highest level since January 2020.
Risky assets like expensive tech stocks become less appealing when interest rates go up. This is even though rising yields are a good thing for the economy. There were many financial companies on the Dow, so it lost only 0.29 percent last week, which isn’t bad.
Big picture: The cost of borrowing money is going up all over the economy. In nearly two years, the average rate for a 30-year mortgage hit 3.22 percent last week, the highest level in nearly two years.