Is the love affair between investors and tech giants coming to an end?

Shares in Facebook, or Meta Platforms Inc as it is now called, fell by a quarter last week, and have continued their decline since then. Indeed, they are one-third down so far this year. That’s partly a specific Facebook story, a function of the decline in the number of active users, and one that has been given a further twist by the latest row with the EU.

But it is also a market story more generally. Other US technology shares have been weak so far this year. Netflix is down by one-third, Tesla by a quarter, Twitter and Peloton by 15 per cent. Even Amazon, despite the business doing very well, is down by 7 per cent, while Microsoft is down 10 per cent and Apple, the most valuable company in the world, is down by nearly 5 per cent.

Cross the Atlantic, and a quite different picture emerges. In London, relatively few high-tech companies are quoted, with the FTSE100 share index heavily weighted to oil companies, banks and consumer goods suppliers. It is actually up a bit this year, by contrast to the Nasdaq index in New York, which is down 12 per cent. Indeed, London and Hong Kong are about the only major share markets that are up so far this year, with both Paris and Frankfurt down.

What is happening? Is this simply a shift in fashion or is there something bigger going on? Well, it is certainly true that some of the least fashionable enterprises in the eyes of investors, at least until recently, have shot up in value. Take oil, for example. BP, which has just reported a surge in profits, is up 17 per cent this year, while Shell is up nearly 20 per cent.

Or look at banking. HSBC, Europe’s most valuable bank, is also up 20 per cent, notwithstanding all the stuff happening in Hong Kong. Even NatWest, the rebranded Royal Bank of Scotland group bailed out by the UK government, is up 6 per cent. That is modestly good news for British taxpayers as the government still owns 55 per cent of the shares.

The plain fact that UK markets are up and almost all others are down does suggest that the UK is becoming less unfashionable for international investors. I don’t think this has anything to do with politics, for obvious reasons, though I do think the markets are looking beyond the period of office of the present prime minister. I suspect that it simply that investors are aware that the UK had strong growth last year following a very weak 2020, and that as the economy improves, there are opportunities to be had. The UK has not become fashionable – let’s make no mistake about that – but is perhaps being viewed with a more measured perspective.

There are, I think, two other things happening. One is a questioning of the very high valuation put on high-tech America. The west coast giants have changed the world, as anyone who has an iPhone, gets something delivered by Amazon, or does a Google search will know. But what price do you put on that? Maybe Apple was indeed worth 3 trillion dollars a few weeks ago, but now it is valued at $2.8 trillion. Still huge, but a bit less huge than before.

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The other thing is the wider awareness that free money is coming to an end. Yes, I know it was never free for ordinary people – borrowing costs never went to zero. But a mortgage at below 1 per cent when house prices are going up by 10 per cent is pretty near free money. As we reported last October, you could get a two-year fix at 0.9 per cent.

Now the world has changed, and the question is: how fast will rates climb? This is a universal story. Even German 10-year bonds, which were yielding less than zero ten days ago, are now yielding nearly 0.3 per cent. I suspect that negative interest rates will soon disappear altogether, never to be seen again in our lifetimes.

The end of near-free money will be a new experience for many investors. The main central banks have held their rates around or below 1 per cent since the banking crash of 2008. And if the world goes back to pre-2008 conditions, what was the previous searing experience for markets? The dotcom crash of 2000.

So, back to the question for high-tech America: is the love affair over? My answer is: no, but it has certainly cooled.