The Nasdaq 100 has officially entered correction territory. The index is down more than 10% from recent highs. So time to panic right? Not exactly. I would argue now is the best time to purchase equities in the index. Some large-cap technology stocks have taken huge hits. While it is easy to justify the selling to increasing rates and inflation, there’s clearly some exaggeration and emotion. When stocks such as Amazon have a new 52 week low, there is a clear opportunity to purchase. Amazon can easily push ahead even with increasing rates from a hawkish Federal Reserve. In fact, analysts have a median price target of $4100 for the company. There are plenty of other equities that have been discounted from this recent sell-off. The best deals will come on companies with a lot of market power and are not heavily affected by higher borrowing rates.
On the other hand, it will remain a volatile time to be in stocks now as the market tries to price in rate hikes and inflationary pressures. It will be extremely important to keep an eye on mega-cap earnings throughout the next couple of weeks. If Netflix is any indication of how larger technology stocks do post-earnings, we are in for a rough ride in the short-term.