Why does it look like carnage in global markets when the S&P 500 is down just 17% from its peak?

The main US index, the S&P 500, is down just 16.8% from the peak. Why then does it seem like there has been carnage in the US market? Why do all those who bought US or global ETFs/funds and enthusiastically opened Robinhood trading accounts look grumpy these days? Why does the pain look so much worse than what is captured in the headline index?

First, the average S&P stock is down 24%, which is not evident in the index, which is calculated on a market capitalization-weighted basis.

More than two-thirds of the stocks in the S&P 500 index have fallen more than the index.

Two, the stocks that everyone so enthusiastically invested in in 2021 through Robinhood accounts, tech funds, and what have you, are down even further.

The NASDAQ index just had its worst month since the 2008-09 crisis and is down 26%.

Major FANMAG/FAANGM stocks (Facebook/Meta, Apple, Netflix, Microsoft, Amazon, Google/Alphabet) listed as “forever” bets last year fell 17-75%, with 3 of them: Amazon, Meta and Netflix down more than 40%.

That is what makes the pain and loss so real for many!

Others in the tech space, including old favorites like DocuSign and Peleton, are down 70-90%. Robinhood shares are down 88%.

Many ‘hot’ topics that were enthusiastically pursued in the last year or two, with many excited by their trading prowess in the US markets, have tumbled down.

The Work From Home (WFH) ETF, which launched at the start of the COVID-19 pandemic, has lost 37% since its peak.

The Renaissance IPO ETF, which tracks the largest, most liquid and newly listed US IPOs, is down 63% from its peak in February 2021 and 50% year to date. This includes the likes of Uber, AirbnB, Zoom, Doordash, and Lyft.

ARK’s Cathie Woods has been the high priestess of pushing high-tech, innovation and more as the ultimate investment theme. Her flagship fund is down 74%, despite Tesla providing a great cushion.

Online retail ETFs like ONLN and IBUY are down more than 65%, while fintech and online payment ETFs like IPAY and FINX are down 40-50% from their 52-week highs.

Cloud computing is down 56%, Blockchain stocks lost 60%, while Social Media stocks (SOCL ETF) are down 56% from their peak.

The other very commercialized topic? It was China/Greater China. Those ETFs are down 43-47%, with Chinese tech ETFs down ~65%.

India’s largest Greater China offshore equity fund is down 43% from its February high. In addition, it charges you a 2.38% expense ratio and a 1% exit charge if you leave within 12 months.

In short, many of the much hyped and ‘historical’ topics that were pushed as perennials have crashed far more than the headline ratings.

These were also themes that appealed to newbies who were excited about easy money.

Remember the numerous NASDAQ fund and ETF launches in India last year, not to mention the ones related to China/Greater China? The enthusiast launches even in the Indian market?

No theme works forever!

The data shows that theme funds typically arrive towards the tail end of the bull run for that particular theme because that’s when retail investors are excited about it and when it’s an easy sell.

Thematic fund schemes are great for raising assets for the fund house, but generally do poorly for investors. More on that another time.

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