“The reduction in liquidity from the Fed will cause both the equity risk premium and interest rates to rise, which will continue to disproportionately impact the riskiest assets in the market including momentum-driven investments in money-losing technology stocks, meme stocks, and particularly cryptocurrencies, which have no intrinsic value,” according to Jay Hatfield, portfolio manager at Infrastructure Capital Advisors.
“A potentially rising interest-rate environment is causing investors to re-assess the risk they are willing to take,” said Todd Rosenbluth, head of ETF research at CFRA. “Higher growth potential, yet less stable businesses are moving out of favour while investors prioritise more stable ones.”Still, he’s not deeming any of the unwinding of these areas of the market as a bubble pop.
Meanwhile, the Invesco Solar ETF, ticker TAN, saw an outflow of more than $US70 million Thursday, the biggest since March of last year. The fund, which in 2020 posted a more than 230 per cent gain, has lost its luster in recent days, as the Fed turns more hawkish. The weakness in technology and cryptocurrency is a double whammy for an exchange-traded fund that focuses on both of those industries: the Global X Fintech ETF. The fund, which holds both upstart technology firms including Affirm Holdings and crypto-related companies like Coinbase Global, has dropped 30 per cent since hitting a record in October.
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