2021-10-04 10:01:31
What happened
Shares of Lemonade (NYSE:LMND) were tumbling today on seemingly no company-specific news. Many technology stocks were losing ground in response to rising Treasury yields, which is likely the same reason Lemonade’s stock was falling.
Its shares were down by 4.9% as of 12:18 p.m. EDT on Monday.
So what
The 10-year Treasury yield inched a little higher today to 1.5%, after reaching a recent high of 1.56% last week. Higher Treasury yields mean that future profits from fast-growing companies, including many tech stocks, won’t be worth as much.
Image source: Getty Images.
The rising bond rates have hurt technology stocks particularly hard, with the tech-heavy Nasdaq Composite falling 2.5% so far today. Lemonade’s stock fell along with some investors’ exit from the tech sector.
Additionally, some investors are getting increasingly concerned that inflation is speeding up and surpassing the Federal Reserve’s target of 2%. That worry may be premature, but rising inflation could eventually slow down some of the U.S. economy’s growth.
Now what
Investors should keep some perspective about Lemonade’s drop today. With the broader market seeing such a significant drop, it would be unlikely for Lemonade’s stock not to fall along with other tech stocks.
Additionally, investors should remember that Lemonade’s share price isn’t sliding because of any problems with the company. Which means that if you have an investment thesis for owning Lemonade’s shares, today’s sell-off probably shouldn’t change your long-term perspective on the stock.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.