Worries over an impending recession in the US is causing investors to flee from high-growth tech stocks.
Earlier this week the reported inflation figures in the US were higher than expected, prompting fears the US Federal Reserve could raise interest rates by as much as one per cent at its next meeting.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown said recession fears and the knock-on effect this would have on the global economy, along with high energy and food prices, were likely to be partly behind the 38 per cent plunge in overall confidence - measured by the HL Investor Confidence Index in September compared to August.
She added: “The euphoria of July’s bounce in shares, which lifted investor confidence in August, has evaporated and although the S&P 500 largely treaded water during the last session, caution abounds.
“Investors have again been showing signs of fleeing ultra-risky assets like crypto and high-growth tech firms and heading to safe havens.
“Realisation is dawning that the Fed is determined to keep pouring water on overheating prices for as long as it takes to cool them off, whatever the short term cost to unemployment and the housing market. Expectations are growing that a softer stance in terms of monetary policy might not now arrive until 2024.”
Tech stocks are particularly vulnerable to rising interest rates because of their future earnings potential.
Amid rising inflation and interest rates, tech stocks valuations have fallen, resulting in a highly risk-averse investment environment.
