Stay Away From These Two Investment Follies In 2023

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The S& P 500 has had a tumultuous 2022, falling an astounding 20% since the start of the year.

A trifecta of increasing interest rates, rapid inflation, and economic downturn fears have contributed to the underperformance of growth stocks. As the bear market approaches 2023, investors should avoid investing in Snap and Peloton companies.

Despite an impressive market cap of $14 billion, Snap Inc. (NYSE: SNAP) has experienced a dramatic decrease in valuation this year – to 81.5%. The primary drivers for this decline have been decreased digital-advertising spending and increased competition from other firms, like TikTok.

In addition, Apple’s (NASDAQ: AAPL) focus on limiting ad tracking through iOS apps has put even more pressure on SNAP’s Performance in 2022.

In September 2021, SNAP stock soared to its most significant value of $83.34 before tumbling sharply and reaching a four-year nadir of $7.33 on Oct 21st. On Thursday, with current estimations, it closed at an astounding 90% below the record peak price of $8.68 per share. 

Snap Inc., the parent company behind the social media messaging app Snapchat is worth only one-tenth ($14 billion) compared to its former market cap at its highest point: a staggering $136 billion.

Investors are not going to be sad to close the books on 2022, with as difficult a year as it’s been for equities and fixed income,” Wells Fargo Investment Institute President Darrell Cronk said. “It’s probably been the most difficult year from a rate of returns standpoint for both those major asset classes in 15-plus years.”

Considering all this, SNAP is at risk of continuing losses in the year ahead. They need help with an unpredictable economic landscape and deteriorating fundamentals due to changes to privacy settings on Apple’s iOS and competition from the Chinese video-sharing app TikTok.

Despite being a top performer in 2020 due to the COVID outbreak, Peloton (NASDAQ: PTON) is now struggling with decreasing demand for its at-home fitness products and supply chain issues. 

It can be attributed to worrying about an upcoming recession and climbing federal interest rates. Year-To-Date Performance stands at -74.2%, while Market Cap has been reduced to $3.1 Billion.

When the economy is tightening and monetary policies are becoming more stringent, companies operating at a loss but with high market values tend to be disproportionally affected. The value of their future cash flows will likely decrease as interest rates increase.

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