Rising bulls, crawling bears: How tech, AI stocks rescued the inflation-ravaged equity markets
December 2022 saw a revolutionary medicine called base editing being used to completely cure Alyssa, a 13-year-old girl suffering from cancer. The doctors at Great Ormond Street Hospital in London were able to save her using bio-engineering technology, giving her a new lease of life. Even six months after the treatment, the cancer is still undetectable. This breakthrough news should have set all the New Age pharma stocks hitting new highs, but that wasn’t the case. So what was happening in the equity markets?
The stock market is a reflection of the economy, and when inflation hits, it can have severe repercussions on both. During inflation, the value of the currency declines, resulting in a rise in the cost of living and a drop in people’s purchasing power. That’s when investors turn to tangible assets like gold and Bitcoin and shift away from stocks and shares.
However, the latest hype in the stock market is around technology and AI stocks, which have rescued the equity market from inflation. These stocks gained value because they are not affected by inflation as significantly as traditional brick-and-mortar businesses. There are many technology companies including Microsoft, Amazon, Google, that are relatively unaffected and continue to perform well in the current market scenario.
Inflation, however, is not the only factor that affects the stock market. Even when companies release positive news, the stock prices may not reflect that immediately. It takes time for the market to react, and if investors do not have the patience to wait and trust the market trends, they may miss out on significant earnings.
Furthermore, the stock market is more prone to emotional trading than rational trading. When price volatility spikes, investors tend to become anxious and sell their stocks. At the same time, when prices start to rebound, investors become optimistic and start buying. This emotional buying and selling cycle can lead to significant gains or losses, depending on the trend at the time. So it’s essential to keep an eye on market trends and invest accordingly.
To sum up, technological advancements, particularly in the AI sector, are helping to rescue the equity markets from inflation. Companies that rely heavily on technology and AI are likely to experience less volatility than other businesses during inflation. However, it’s important to keep in mind that the stock market is unpredictable and should not be influenced by emotions. It’s crucial to monitor market trends and invest based on rational analyses.
