Why American tech stocks are newly vulnerable

AS THE panic fades, investors’ nerves are still jangling. For the time being, stock markets have stopped convulsing and the prices of American Treasury bonds are no longer in free fall. Yet share indices across America, Asia and Europe have hardly recovered their poise; instead, day-to-day drops of a percentage point or more have become unremarkable.

The VIX index – Wall Street’s “fear gauge”, which measures expected volatility using the market price of insurance against it – has fallen from its nerve-shredding peak reached a fortnight ago. It is nevertheless at a level last seen in 2022, amid a grinding bear market. The price of gold has been breaking record after record. Investors, in other words, are offloading risk wherever they can and preparing for a drawn-out slump.

For one group of stocks, that is an especially big problem. “You can only sell what you own,” says Michael Hartnett of Bank of America, “and by the end of last year, fund managers in aggregate had a record-breaking ‘overweight’ position in US equities.”