The crisis of the collapse of the American “Silicon Valley” bank has had wide repercussions on many economic sectors during the past days, at a time of increasing fears of investing in technology companies, which have become facing great risks.
This comes at a time when Western reports revealed that US companies in every industry will continue to invest in technology, despite expectations of a recession in the coming period.
Against the tide.. “Investments must continue”
- Analysts and economists said that it is important to continue investing in technology companies, especially startups, because everything a person needs can no longer be done without technology.
- This is what Johnson Controls chief technology officer Vijay Sankaran said: “We have to keep investing.”
- “The economic outlook is uncertain, and although there are contingency plans and some initiatives are scaled back or slowed down, commercial investment in technology remains remarkably resilient, and this trend seems likely to continue in 2023,” says Sankaran.
What do “young investors” do?
For his part, the chief market strategist at Orbex, the economist, Asim Mansour, analyzed in an interview with “Sky News Arabia” the state of the technology market during the coming period, and his advice to small investors in this sector, saying:
- It is very natural for stock markets to decline strongly, after the state of panic that struck the markets following the bankruptcy of Silicon Valley Bank “SVB”, but I believe that these declines will be temporary, because the current crisis is not at all similar to the crisis of 2008.
- The current crisis is the result of a wrong investment plan by the bank, which had about 60 percent of its investment volume in US bonds, whose price dropped dramatically due to the strong interest rate hike by the US Federal Reserve.
- With the emergence of new developments, such as high inflation, weak economic growth, and tightening monetary policy, this optimistic picture did not remain, and pressures increased on the technology sector, and thus the banks that were exposed to it were greatly affected.
Tips for investors
- Commenting on the fact that crises create wealth, crises lead to the evaporation of investors’ balances, and then there are some who can make fortunes from them if they have a correct future vision.
- At the present time, it cannot be said that investing in the technology sector is a good option, because it does not perform strongly in an environment characterized by high interest rates.
- A good investment right now is in Value stocks and defensive stocks In sectors that outperform during recessions, such as: consumer and utility sectors.
Regarding the nature of the damage affecting the technology market, the economist indicated that:
- The damages will be somewhat of a narrow scope, as the US Federal Reserve will intervene by launching direct financing mechanisms, to ensure that depositors get their money, reduce panic and reduce risks to the banking sector, and thus avoid strong market collapses.