Prepare for a ‘bumpy ride’ ahead in tech stocks as e-commerce keeps getting pressured, says a venture investor who thinks you should own Amazon

• Prepare for a “bumpy ride” in stocks, longtime angel investor Mike Ghaffary told CNBC on Thursday.
• Markets had a “false sense of hope” that the Federal Reserve wouldn’t embark on an aggressive rate-hike cycle, he said.

Tech stocks are leading Thursday’s market rout, and investors should brace for more volatility as the Federal Reserve’s hawkish push in raising interest rates leads to repricing, Canvas Ventures’ general partner Mike Ghaffary said on CNBC on Thursday.

The Nasdaq Composite tumbled by more than 5%, and the S&P 500 slid by more than 3%. E-commerce stocks including eBay, Shopify, and Etsy and Wayfair were part of the selloff after the companies reported mixed financial results that often included weaker-than-expected forecasts.

The rout erased Wednesday’s rally that took place after Fed Chairman Jerome Powell said the central bank wasn’t actively considering a rate hike of 75 basis points that would follow its half-point increase to the benchmark lending rate to a range of 0.75% to 1%.

“Yesterday, there was a false sense of hope that surrounded this idea that there wouldn’t be an aggressive rate hike in the future. But I think the reality set in that we’re in the middle of a long deleveraging cycle that’s going to continue to be painful,” Ghaffary said in an interview on CNBC’s “TechCheck” show.

“In addition to that, you’ve got obviously inflation and labor issues. So I think you’ve got to buckle up for a bumpy ride ahead,” said Ghaffary, who co-founded podcast distributor Stitcher and was a Yelp executive before joining Canvas Ventures in 2019.

Growth-oriented tech stocks in particular are vulnerable as bond yields climb alongside the Fed’s tightening cycle. On Thursday, the 10-year Treasury yield soared as much as 17 basis points to 3.09%, the highest since 2018.

And more hawkishness is expected. Economists widely consider the Fed as being behind the curve in taming inflation which in March had accelerated to 8.5%, the fastest increase since December 1981. Fed funds futures investors on Thursday priced in an 82.9% chance the central bank will raise its key rate by 75 basis points at the June 14-15 meeting.

Still, Ghaffary was upbeat that some stocks will eventually come out of the current turbulence.

“For example, Amazon is a long-term hold,” he said. “They face a lot of headwinds now. They are priced very aggressively. But it’s hard for me to imagine a future five years from now where Amazon isn’t a really valuable company and continuing to increase market share.”

There are stock bargains to be had in the e-commerce space but that space is facing a difficult interest rate environment and increasing inflation that will put pressure on consumer spending.

“If you’re trying to day trade and if you’re trying to call the bottom market, that’s notoriously difficult. If you have a long-term view, you can build a case around a few specific companies if you have a reason to think they’ve got a defensible long-term moat that will give them an advantage,” Ghaffary said.