Last week, we talked a bit about how curve steepening was accompanied by an unwind in the things that have been “working” during the “slow-flation” environment.
Correlation doesn’t equal causation, but it was worth noting that the growth shock-led steepening episode seemed to catalyze what Nomura’s Charlie McElligott flagged as a “‘Momentum’ factor unwind, correspond[ing] with the reversal in the Growth / Value ratio.”
Fast forward to Monday and the Momentum ETF is on pace for its third consecutive day of losses in excess of 1% – this would be the first time that’s happened since February of 2016:
Meanwhile, the Growth ETF has underperformed the Value ETF for six consecutive days:
At the same time, the spread between the Nasdaq VIX and the “regular” VIX is at the highest since April.
Given all of that, and given how critical Growth/ tech is to the broader market, just about the last thing everyone needed was for Google to take a hit from yet another negative headline about privacy and data misuse. But alas, on Monday afternoon, the Wall Street Journal reported the following:
Google exposed the private data of hundreds of thousands of users of the Google+ social network and then opted not to disclose the issue this past spring, in part because of fears that doing so would draw regulatory scrutiny and cause reputational damage, according to people briefed on the incident and documents reviewed by The Wall Street Journal.
As part of its response to the incident, the Alphabet Inc. unit plans to announce a sweeping set of data privacy measures that include permanently shutting down all consumer functionality.
Minutes later, Google made the announcement:
Google subsequently fell to day lows before bouncing.
While nobody should make a mountain of a mole hill here, this does underscore the fact that privacy concerns, data misuse (whether intentional or accidental) and the read-through for a prospective regulatory crackdown are the chink in tech’s armor.
To the extent tech, Growth, and Momentum are Atlas when it comes to shouldering a disproportionate share of the market burden, any news that suggests the robots’ Achilles heel is being exposed is not great. Throw in the fact that it looks like Google might have tried to hide this from users and the news is likely to leave an especially sour taste in everyone’s mouth.