AMZN -16.8%, NVDA -16.3%, AAPL -10.7%, META -16.3%; What’s next?

The mood of market players continues to be pessimistic in the wake of a brutal week for the equities, which was accompanied by a widespread market sell-off. Stubborn inflation and worries around an increasingly aggressive Federal Reserve (Fed) continue to put pressure on the stock market and risk assets in particular. 

In the same way, investors are expecting the Fed to hike rates by 75 basis points during the meeting on June 15, while worries grow that central banks won’t be able to tame the consumer prices without pushing the economy into a recession. 

Thus, the losses in the broader market were sharp, with the S&P 500 losing over 21% year-to-date (YTD), wiping out more than $8 trillion of market value in this year alone. 

Big tech stocks suffered the largest drawdowns, with Amazon (NASDAQ: AMZN), Nvidia (NASDAQ: NVDA), Meta (NASDAQ: FB), and Apple (NASDAQ: AAPL) falling, 16.8%, 16.3%, 16.3%, and 10.7% respectively.  

Crypto not faring any better

Similarly, cryptocurrencies continued to drop, with Bitcoin falling below $21,000, over 30% in just one week, signaling that investors are dumping their most speculative holdings. 

There also seems to be some correlation between the crypto market and the stock market, as Bitcoin is apparently tracking the performance of the Nasdaq and S&P 500 indices over the past 30 days. Nonetheless, the Fed meeting will most probably determine the direction and possible decoupling of this trend.  

What happens next for markets?

Throughout history, a bear market lasts on average 389 calendar days from peak to bottom, which means that currently, the market is halfway there. 

Some indicators may signal to market participants if more pain can be expected, such as the Cboe Volatility Index, also known as the VIX. Typically, the VIX is considered to be a ‘fear gauge’ measuring the expected volatility in the markets, expressed by options prices.

During the Covid drawdown, the VIX reached 85 levels, while on average, at market bottoms, it reached 37. During the market sell-off on Monday, June 13, the VIX was at 35.05. On the other hand, the volume of put options reached 2.03 million on Monday, the highest level since February 2020, as per Cboe data.  

Comparably, the American Association of Individual Investors sentiment survey shows that investor sentiment is declining slowly, which could mean more pain in the broader markets if retail investors start pulling out. 

Eventually, buying into the stock market will probably occur, as some stocks are seemingly becoming oversold. However, deciding when to enter may be one of the toughest choices an investor has to make in a bear market.