The Big Tech Winter and the WWW-Shaped Recovery

Big Tech Winter, Crisis
  • The poor performance of Big Tech last week is a warning sign.
  • The second and third waves of coronavirus may have serious economic consequences.
  • The recovery from the crisis may be much longer, and W or WW-shaped.
  • A vaccine can prove much less helpful than people expect.
  • But more and more QE and inflationary risks may support the stock market.
  • (Opinion.)

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The Big Tech Winter Is Here

All the summer I was thinking about, we were going to have a big second wave of coronavirus, which would also have serious economic consequences. (I also shorted the U.S. and German stocks.) Since everything in Europe was nice in the summer, there were only some infected, so no one believed me. Some looked at me and other pessimistic analysts as stupid. Everything went up on stock exchanges, the young Robinhood traders seemed to be kings–at least you could read this in many places.

Because of the behavior of other similar viruses, we could suspect it early that this epidemic was also seasonal. In winter, in the cold, it spreads much faster than in summer. But, many people thought in summer we got over it already. Many people still don’t take the pandemic seriously today. Not even now, as the hospitals in some countries are filling up with sick people.

But last week, the exchanges showed a different picture. The Big Tech-winter seemed to be here.

Months of Quarantine to Come?

Many sick people in October could lead to mass deaths in November and later. More and more people will be scared. Other strict restrictions may follow, or the existing ones will be prolonged. The economic consequences may be devastating. I’m not alone in my opinion.

Goldman Sachs slashed Europe’s fourth-quarter economic growth outlook. Looking ahead, we assume that the new restrictions will last for three months before they are gradually rolled back starting in February Goldman Sachs economists wrote. (

It is unclear which impact the high numbers of the coronavirus will have on the U.S. economy. It’s the third wave there already. It also depends on the outcome of the election. Different president, different measures. (Or the lack of them.)

Big Tech Falling on Good News

Perhaps that’s why the market was reacting to the good news with falls last week. It was the worst week of stocks since March in the US. An ugly big red candle, not seen on the charts of the stock indices since the spring. Although the internet giants, which account for a huge share of the stock markets rise this year, reported good earnings for the third quarter, exceeding expectations. Sure, there is a lot of uncertainty in the life of these companies, but which company has no doubts?

Chart: Amazon, Apple, Facebook, Alphabet, and Microsoft stock prices, YTD
Chart: Amazon, Apple, Facebook, Alphabet, and Microsoft stock prices, YTD  (

If the stock markets fall after good news, that is a bad sign. Of course, they could also fall, for example, because of the great uncertainty surrounding the U.S. presidential election of tomorrow. But it is also possible that the consequences of the epidemic are considered now by analysts to be more severe. It may no longer leave technology giants untouched. A tough winter wave and a prolonged crisis could also reduce the performance of the world’s largest companies.


In the days of November 9-11, the Nasdaq 100 index underperformed and Big Tech-companies dragged also the S&P 500 lower. Because Pfizer announced a study about high efficiency of its vaccine, investors sold technology, buying conventional sectors like industry. They were out from “quarantine sectors” and entering cyclical branches.

The Disruption of the Ant Madness?

It is also possible that the bull is out of breath already. Stock market indices have been rising for months, but the last few weeks showed stagnation. Many inexperienced investors, who only bought shares because of the crisis, could get scared and start withdrawing their money. Or they bought no more.

V-Shaped recovery from crisis
V-Shaped recovery from crisis

Ant shares could also have had a serious effect. The Chinese financial technology (Fintech) giant has absorbed a huge amount of capital, dozens of billions of dollars. That can already have a serious impact on demand for all other stocks. Many people may no longer dare to spend money on already very expensive technology titles. But they still dare to buy into a new emission. Many previous public stock selling tardes (IPOs) ended very well for participants.

The V-shaped and the W-shaped crisis

In the spring, many people were still hoping that the crisis would be V-shaped. That means a quick, deep fall, followed by a similar bounce back. Maybe already by the end of this year, the economy could reach a similar level like before the coronavirus crisis–they thought. This was what politicians also hoped for in many countries.

W-Shaped recovery from crisis
W-Shaped recovery from crisis

But investors who were more cautious, pessimistic, or more familiar with the behavior of viruses have already suggested that there could be many other variations. For example, the W-shaped crisis, in which a second wave of the virus attacks hard. So another bottom is to be expected, like those of last spring. (Back then, there was even a U-shaped crisis among the scenarios. Like a V, but with a longer stagnation at the bottom of the pit. This scenario didn’t happen.)

7 Reasons the W Could be Replaced by a WW or L-Shaped Crisis

The third wave is already extended in the United States. The devastating Spanish Flu, around 1918-1919, also comprised three waves. Many people hope now that after the vaccination, we can forget about the virus with lightning speed and return to our old lives. But I read worrisome news and statements from scientists that a vaccine won’t solve everything so fast. It will take much longer for us to forget about the virus. How can the crisis persist much longer than most people expect?


The effectiveness of vaccinations is never one hundred percent. It may be only 50-60. That means many people can get sick despite the vaccine.


Many people don’t even want the vaccine. They also will continue to get infected, sick, and some could die despite the vaccine.


Once the vaccine is ready, it will take longer to distribute, transport, and use it. Rather for months, even in the most developed countries. It may not even reach all countries, and the virus could continue its destruction there, causing also further recession. This also threatens the global economy through international demand, trade.


It turned out, and many people don’t even know about it, you can suffer permanent damage by the coronavirus. Even if you don’t die. The COVID-19 can damage various important organs, even the brain. Some countries already have data for this, such as the United Kingdom. They registered many tens of thousands of such protracted cases.


There may be some unexpected failures, such as the vaccine not being effective enough or causing later complications. This can delay vaccination attempts by months, even years. No vaccine has ever been developed in such a short time. There are diseases for which they never found a vaccine.


Protests against the restrictions are intensifying in many countries. People are just tired, they don’t want to live like this, they rather take the risks. (Or they deny the existence or the dangers of the virus.) This can only get worse over time, which aggravates also the epidemic, worsen the economic situation.


A mutation in the virus may be born that is even more dangerous than before or spreads even more effectively. There are signs of this, with a version reported from Spain that seems even more virulent. (But the proportion of fatalities may be lower.)

A Recession in Form of WW or WWW?

There are too many risks. I think it’s likely that after the second wave, even with a vaccine, there will stay plenty of economic and social problems with us. It is possible that even in 2022 we will have to deal with the epidemic and its consequences, and suffer serious economic damages.

WW-Shaped recovery from crisis
WW-Shaped recovery from crisis

So, the recession may be very long. It can come in waves (WW, or almost in WWW form, see the drawings). In a better case, the bottoms of these W letters will get higher and higher. Or we can expect a very slow and difficult recovery (L-shaped or root-sign shaped crisis).

Something I call WWW-Shaped recovery from crisis
Something I call WWW-Shaped recovery

By a longer crisis, most people will look closely at what they spend money on. Both online and traditional commerce. Both consumers and companies. With uncertainties, demand will fall, because people will have to live modest, cheaper. It’s possible that’s why last week has been so bad on the stock markets because many investors are now really aware of these dangers.

L-Shaped or root-sign recovery from crisis
L-Shaped or, better, root-sign recovery

Protection Against Inflation and Recession

The question is what can we do in this situation. The stock market is always pricing in the future, but which one? There are too many variations. Stocks don’t appear to be undervalued. But inflation risks may increase with infection rates. More and more QEs are expected. This helps stock prices. That’s why I don’t expect a huge stock market downturn either.


Because of inflation risks, in the longer term, I prefer the shares of commodity companies. (Like Big Oil, I wrote about them here.) And I’m still thinking about buying some dividend aristocrats. Investments that are capable to keep their value also by inflation and recession seem attractive now.

The Winter Sentiment Picture

Analysis based on market sentiment paints a different picture in the long term. Indices and leading stocks may fall temporally because the market patterns predict a correction. The second or third wave is only triggering this decline.

Tom Walker’s conclusion, who conducted his own study, was that it was exceptionally difficult to identify a connection between market trading and dramatic surprise news. (…) Well, the market is now providing us a set-up for another decline. There is a strong potential for a 10-15% pullback. I am quite certain that you, the news media, and all the pundits will find the reason for a decline – after the factwrote Avi Gilburt in SeekingAlpha, on October 26. (The S&P 500 index fell almost five percent since then, in five days.)



I’m not a certified financial advisor nor a certified financial analyst, accountant nor lawyer. The contents on my site and in my posts are for informational and entertainment purposes and reflecting my collection of data, ideas, opinions. Please, make your proper research or consult your advisors before making any investment or financial or legal decisions.

I’m long in gold miner stocks and silver, platinum, cryptocurrencies, energy stocks. Short in the S&P 500, crude, natural gas and the German DAX at the time of writing.


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