High-profile victims include Peloton and Robinhood, the share trading app that became famous during an explosion in retail trading at the onset of the pandemic.
Perhaps the clearest indication of waning mania is Bitcoin, which has fallen about a third since November.
“When you go back to a more normal world where a central bank is not just there to print money and support markets, then you have [to consider] the risk that you’re actually taking,” says Lafargue.
For now, the super-heavyweight tech companies that have powered the rally of the past two years – particularly Google, Apple, Amazon, Microsoft and Facebook – seem comparatively resilient, likely because their valuations are built on firmer profit foundations than many smaller tech companies.”
But even the more solid companies may struggle to live up to booming revenues and profits experienced earlier in the pandemic.
“It is a much harder, higher hurdle to overcome for companies and corporate earnings to meet the expectations of analysts and, by extension, of investors,” says Joachim Klement, from broker Liberum. “If they don’t meet those growth expectations, there’s obviously going to be a re-rating.”
In autumn, analysts at BNP Paribas put together what they dubbed a ‘cappuccino’ index, named for the coffee’s foamy top, comprising some of the more dubious equities – many of which have slumped in the period since.
Greg Boutle from BNP Paribas says investors have turned away from such companies, “that are offering the promise of something further down the line rather than evidence of delivery of it”. This year, he thinks the focus will be more on companies that can actually make money.
The Fed has previously stepped in when markets become unstable, such as at the onset of the pandemic, but analysts argue it may be more hesitant to act on the stock market’s latest wobbles.
“For now, the Fed doesn’t really seem to mind the correction in the tech, growth-space,” says Rabobank’s Stefan Koopman.
“As the saying goes, stability eventually breeds instability, and some risk to make up for the recent lofty returns is actually in line with the Fed’s financial stability mandate.”
Many retail investors have already been stung by the market shakeout. Data from Bank of America suggests it was retail investors and hedge funds who bought the recent dip.