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[London 4th Reuters BREAKINGVIEWS]- The solvency of top high-tech stocks is increasing as a safe investment destination due to the inability to resolve the US presidential election.FB.OActions like these have outpaced other sectors from the earliest stages of the voting process. In the future, if the political situation stagnates, it will be difficult for the giant IT companies to be rigorously prosecuted in terms of the antitrust law (antitrust law).
The presidential election can be uncertain for weeks without a clear winner, and President Trump’s willingness to compete with the Federal Supreme Court for election results can be a source of confusion. ..
Meanwhile, the yield on 10-year US government debtUS10YT = RRIt decreased by 10 basis points (bps) to around 0.8%, probably because the Democratic Party was unable to win the presidential and parliamentary elections, reducing the possibility of large-scale economic measures being put in place. It’s revealing. Yet in such chaos, Nasdak’s synthesis.IXICIncrease of approximately 4%.
This is not the first time that a high-risk, high-tech stock has been turned into a “safety asset.” Amazon, Facebook, whose price dropped once in March this year when the spread of the new corona virus began in earnest.AMZN.O, AppleAAPL.O, NetflixNFLX.O, AlphabetGOOGL.OThe Google subsidiary, the so-called “FAANG brand,” recovered quickly and showed stronger price movements than gold, which is a safe asset that has remained unchanged. FAANG’s annual rate of increase is 50% on average, 25% for gold and S&P in general..SPX500 species is 7%.
This good performance is partly due to the business model of the main high-tech companies. Lockdown encouraged working from home, using online shopping, and watching funny videos, increasing the demand for such services from high-tech companies.
As a result, data from FTSE Russell Research shows that the high-tech earnings outlook has barely fallen, despite the fact that sectors such as finance, manufacturing, and oil and gas are expected to decline significantly next year.
And this choice could also be a tailwind. Investors feared that if former Vice President Byden wins the presidential election and the Democratic Party wins the majority, not only will it be easier to raise taxes, but it will even aim to dismantle some giant IT companies. ..
However, such development is unlikely to occur again. The next four years may not be as tough as we worried about for the giant IT companies.
However, it cannot be said that it is absolutely safe. For example, the Trump administration has already sued Google for violating the Antitrust Act, and even a parliament with clear partisan conflict can toughen it up.
Also, Trump is constantly on Twitter.TWTR.NAlthough I use it, I don’t like Amazon. Although FAANG has been reduced recently, the profit margin (PER) is still 43 times higher than the fashion profit, which is 28 times higher than the total of 500 types of S&P.
Still, as a consideration for safety, the 10-year German government bond yields minus 0.65%, that is, until the investor pays a “commission” from here.DE10YT = RRIt is much safer to have a dominant position in the market and own growing high-tech stocks than to buy one.
● Background news
* On the 4th, the day after the presidential election, the stock prices of Facebook, Alphabet, Apple, Netflix and Amazon rose.
* The growth rate at Nasdak, which has a large share of high-tech stocks, was 3.9%, which was up from 2.2% in the 500 S & Ps.
(I am a columnist for “Reuters Breaking views”. This column is based on my personal opinion).
* Reuters columnists provide the content such as news, transaction prices, data and other information in this document for your personal use only and for business purposes only. It is not a thing. The content of this document is not intended to solicit or induce investment activity and is not appropriate for use in making decisions when trading, buying or selling this content. This content does not provide any investment, tax, legal or other advice as investment advice, nor does it make any recommendation with respect to specific individual financial stocks, financial investments or financial products. Use of this document is not a substitute for investment advice from qualified investment professionals. Reuters makes reasonable efforts to ensure the reliability of the content, but any views or opinions provided by the columnist are the views or analysis of the columnist, not the views or analysis of Reuters.
