What happened
The share prices of Lemonade (LMND +0.54%), Fastly (FSLY +3.55%), and Block (SQ +0.17%) are falling again today in sympathy with the broader market as investors continue to process the news about the potential for conflict between Russia and Ukraine. Additionally, some Block investors may be selling shares because an analyst lowered his price target for the stock.
Lemonade was down by 1.5%, Fastly had slid 3.2%, and Block was down by 1.8% as of 12:11 p.m. ET.
So what
Stocks have been erratic lately, in part because of increasing tensions in Europe. Yesterday, President Biden announced new sanctions against Russia after Vladimir Putin recognized two breakaway regions in Ukraine and sent the Russian military into those areas.
Image source: Getty Images.
Investors are growing increasingly concerned about an expanded military conflict between Ukraine and Russia, and many have been exiting their positions in some stocks. The S&P 500 fell 1% yesterday and was down 0.5% by midday today.
Conflict between countries doesn't always cause investors to change their investment strategies, but the scope of the situation in Europe is fairly large. The European Union has issued sanctions against Russia, as have Japan, Australia, Canada, the United Kingdom, and Germany.
Additionally, investors were already exiting many technology stocks, including Lemonade, Fastly, and Block, over the past few months as investors worry that rising inflation and upcoming interest rate hikes by the Federal Reserve could hurt growth stocks.
The share prices of Lemonade and Block have both fallen 64% over the past six months, and Fastly is down 53% over the same period.
NYSE: LMND
Key Data Points
The Fed is expected to raise interest rates several times in 2022, with the first rate hike potentially coming next month. Higher interest rates mean more expensive borrowing for companies, which can hurt their growth. That, in turn, makes investors less enthusiastic about buying growth stocks, many of which are technology companies.
Investors are also growing increasingly pessimistic about inflation, which is now at a 40-year high. Higher prices hurt consumer demand for products and services, which can be bad for companies and the economy in general.
And finally, Block investors may also be reacting to the fact that Josh Beck, an analyst at KeyBanc, lowered his price target for Block stock today from $225 to $175. The move comes just one day before the company is set to report its fourth-quarter 2021 results.
Now what
Lemonade, Fastly, and Block investors may want to plan for more volatility ahead. With tensions still very high in Europe, U.S. consumers struggling with high inflation, and upcoming interest rate hikes very likely, these stocks -- and the broader market -- could experience more share price swings in the short term.
While it can be tempting to act on what's happening in the news, long-term investors in Lemonade, Fastly, and Block may want to instead revisit their initial investment theses to keep themselves from panicking.
While some macroeconomic events could affect these companies, it's usually best to wait and see how these companies perform over several quarters during difficult times before rushing to make a change in investing strategies.
