What Meta’s $251 billion market cap rout teaches about investing
A version of this post was originally published on TKer.co.
Just because the stock market usually goes up doesnât mean that all stocks always go up.
One stock that didnât go up last week was Facebook parent Meta Networks (FB).Âč After reporting disappointing quarterly results on Wednesday, the companyâs shares plunged 26% in a single trading day. After losing an eye-popping $251 billion of market cap, the social networking company quickly went from being the fifth largest company in the S&P 500 to the seventh.
Itâs the kind of move that couldâve rattled the confidence of investors and traders with positions in other stocks. And it did: That same day, the S&P 500 fell 2.4%.
But losing 2.4% isnât remotely close to losing 26%. Thatâs diversification at work. By investing in a variety of assets that arenât perfectly correlated, you limit the ability of a single stock to ruin your finances.
Zooming out a bit, the S&P 500 actually gained 1.5% for the week while FB shares lost 21.4%. Diversification is looking pretty great right now.
Of course, there is an opportunity cost.
Investors who are diversified through index funds like SPY didnât fully experience the jumps in Alphabet and Amazon, which gained 7.5% and 9.5%, respectively, last week following strong financial results.

Now, Iâm not going to tell you not to try your hand at picking stocks. How you invest your money is up to you.
But before you decide to abandon index funds as you try to get in front of the next Alphabet or Amazon, keep in mind there is an entire industry of professionals trying to beat the market this way. And most of them fail to do so, year in and year out.
Few market observers, if anyone, couldâve confidently told which stocks would surge and which stock would fall last week. However, the historical data says when youâre invested broadly in the stock market â understanding that youâll have exposure to both winners and losers in the market â youâll probably be pleased over time.
Thatâs because over time, the stock market as a whole usually goes up.
Some recent stock market features from TKer:
Rearview đȘ
đ Stock market rally: The S&P 500 climbed 1.5% last week. Itâs down 5.6% since the beginning of the year but up 16.2% from 12 months ago. For more on market volatility, read this.
đ Jobs surprise: The U.S. economy added 467,000 jobs in January, which was much stronger than the 125,000 gain expected. Additionally, the previously reported November and December estimates were revised up by 709,000. âThe feared disruption of the labor market from the omicron variant was not as bad as expected in January,â Nick Bunker, economic research director at Indeed Hiring Lab, wrote on Friday.

đ A bullish jobs detail: From MacroPolicy Perspectiveâs Julia Coronado: âThe number of people working part time but wanting full time work fell again in Jan to the lowest level since 2001. The labor market has now unwound that entire source of worker insecurity that was so persistent after the Great Recession, and we should expect further improvement!â For more on part-time jobs, read this.

đ More hiring to come: There were 10.9 million job openings in the U.S. as of December, according to the BLSâs Job Openings & Labor Turnover Survey. That means there are now 1.7 job openings per unemployed person. For more on job openings, read this.
đ Autos recovery: Vehicle sales in the U.S. were pacing at a 15.0 million annualized rate, which was stronger than the 13.0 million expected. âLooks like supply chains finally caught up with demand a bit,â Liz Young, head of investment strategy at SoFi, said.

Hereâs GM CEO Mary Barra (via Joe Weisenthal) on auto supply constraints: â… we’re seeing, definitely seen improvement in first quarter over fourth quarter. We saw fourth quarter better than third quarter, and we really see with the plans we have in place now, by the time we get to third and fourth quarters, we’re going to be really starting to see the semiconductor constraints diminish.â
đ Facebook face plant: Facebook parent Meta Platforms shares crashed 26% on Thursday after the company reported disappointing Q4 results. Facebookâs daily active users declined during the quarter for the first time in the companyâs history. Also, the companyâs ambitious metaverse business lost over $10 billion in 2021.

đ Google booms: Google parent Alphabet shares jumped 7.5% on Thursday after the company reported strong Q4 financial results. The company also announced plans for a 20-for-1 stock split.
đ Amazon Prime time: Amazon shares rallied 13.5% on Friday after the company reported better-than-expected Q4 results. Management said it was raising the annual price of its Prime membership to $139 from $119.
Up the road đŁ
The January consumer price index report will be released on Thursday. Itâs broadly anticipated that the report will confirm that inflation remains hot, and itâs already the case that the Federal Reserve is working to address it with its monetary policy tools. Nevertheless, the report will still be of interest as inflation has increasingly become a politicized issue.

Earnings season also continues with Pfizer, Uber, Disney, Coca-Cola, PepsiCo, Kelloggâs, and Twitter among the big companies to announce quarterly financial results.

Âč The company still hasnât changed its ticker from FB to META, adding to confusion.
A version of this post was originally published on TKer.co.
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