It’s ugly out there.

The Dow Jones Industrial Average might have hit an all-time high today, but growth stocks can’t find a bottom, particularly the high multiple ones. ARKK, the poster child for this group, is down 45% from its highs last February, the largest decline in its history.

The ExxonMobil and Zoom charts perfectly encapsulate investor sentiment over the last year. When the latter went public, the former was 21x the size. And then, for one brief moment during the pandemic, Zoom took the lead. Exxon is now 5.5 larger. Order has been restored to the galaxy. 

As these names have sold off, multiples have crashed. The median price to sales ratio peaked in February at 33 (Zoom got up to 120) and is now down to 10.5.

This number is pretty meaningless on its own, so let’s look at it compared to the Nasdaq-100. The large (mostly tech) index is 7.8. A few more weeks (days?) like today and this might flip.

There is a reason why investors were bidding up these growth names. For their growth! The chart below shows that even though revenue growth came down recently, these companies are still growing their top line at a healthy clip.

These stocks are crashing, I think, because easy money is about to get a little less easy. The 10-year treasury closed at the highest levels since April of last year, and markets are anticipating a couple of rate hikes later in the year. Inflation isn’t helping things either. This is of course an after-the-fact justification for what’s been going on for the better part of a year, but you don’t have to be Sherlock Holmes to connect the dots.