The action overnight between the SPX (S&P500) and the NDX (Nasdaq) is quite telling.

The SPX was flat, and NDQ was down sharply, as Snapchat grew more slowly than expected, citing macroeconomic impacts. The stock was off 42% after hours, as supply chain, labour, and energy costs all bit into margins, and that seemed to weigh on stocks like Amazon, Meta, and so forth.

Firstly, I wouldn’t draw any macroeconomic inferences from a stock that sells you ads whilst deleting temporary photos from your phone.

Secondly, I’d argue the vagaries of youth (tastes and preferences) is what drives adoption/sales for that company, in ways I’ll probably never quite understand, but that aren’t related to sales in the broader economy.

Third, and here lessons are drawable, is that some “secular growth stocks” are not proving quite so secular after all. If margins for a stock that is meant to be unrelated to the economy are impacted by things related to the economy, should you pay a premium? Probably not.

Fourth, the S&P500 is flat whilst the tech-heavy, secular growth stock heavy, NDQ is down reflecting the valuation issue highlighted below. The growth stocks are overvalued.

It isn’t so much a growth scare (yet!) from tighter policy, or the impact of higher rates per se, but rather a reassessment(perhaps triggered by the higher rates) of what is reasonable in the first place.

That, perhaps, is the lesson to take.

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