What happened
Shares of Twilio (TWLO -1.59%), a cloud-based communications platform provider, were tumbling Thursday as investors grew increasingly concerned about high inflation, upcoming interest rate hikes by the Federal Reserve, and the conflict in Europe.
While there wasn't any company-specific news about Twilio, the tech stock still closed the session down by 5.5%.
So what
For the past six months, stocks in the technology sector have been reeling as investors have grown increasingly concerned about inflation, which has reached levels not seen in four decades.
Image source: Getty Images.
That has caused many investors to shift away from high-growth companies -- including Twilio -- in search of more stable investments. The mass exodus from such stocks has pushed the tech-heavy Nasdaq Composite down by nearly 12% over the past six months -- and dragged Twilio shares down by a staggering 56%.
In response to soaring inflation, the Federal Reserve is expected to issue its first hike to the benchmark federal funds rate since the COVID-19 pandemic began later this month. That rate has been held at near zero since early 2020. This move will likely be the first of several 25-basis-point interest rate hikes this year.
While boosting interest rates is expected to put the brakes on inflation, it could hurt economic growth as well. Investors are therefore anticipating a potentially less robust economy, and thus, less robust growth from tech companies.
And finally, the conflict in Europe has added to the uncertainty in the market as investors wonder what its long-term effects might be on economies around the world.
Now what
Twilio shareholders may be better off ignoring some of the current volatility in the market. Instead, they should focus on their original investment thesis for the company. Volatility will likely continue over the short term, but investors who maintain their long-term investing timelines will have much better odds of avoiding the types of losses many investors are experiencing right now.
