Although some major benchmarks are holding up well, the Nasdaq Composite has been down fairly sharply for two days in a row.
Looking more closely within the Nasdaq, many of the up-and-coming high-growth companies that have performed so well over the past couple of years are coming under substantial pressure, with outsized declines that seem out of proportion to any fundamental news.
Monday afternoon’s earnings results from Zoom Video Communications sent that stock down 18%, falling below the $200 per-share mark for the first time since the first half of 2020.
When a stock generates 100%, 200%, or even 500% returns in a short period of time, even a pullback of 30%, 40%, or 50% can represent merely a correction in a longer-term upward trajectory.
By their nature, high-growth stocks are more susceptible to big market swings because most of their potential is in the future and therefore subject to greater uncertainty.
The smart move for long-term investors is to keep your eyes squarely on the business prospects for the companies whose stock you own.
More often than not, though, share-price moves are noise with little relation to the fundamental factors that make them promising businesses.