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Increasingly, the public is viewing Big Tech through a different world lens — not as individual companies operating in efficient markets, but as winner-takes-all monopolists abusing their power.
This reflects a deeper understanding of their business models, where the preferences, exchanges and interactions of users are monitored, leveraged, and ultimately pushed and promoted across business lines through behaviourally-targeted algorithmic methods. Looking ahead, regulators are aiming to throw a big stick in the spoke of Big Tech’s business model. And why shouldn’t they?
The pandemic has hyper-charged the world’s movement to digitization. Data, not oil, has become the lifeblood of the modern economy. Google, Facebook and Amazon now account for more than 70% of online advertising globally. There are legitimate concerns that Big Tech will stifle innovation and continue to swallow younger competitors.
America has been a chronically strong performer. This extends all the way back to 2009 – its stock market, bond market, and currency have all outpaced global counterparts since then. And even though the U.S. share of global GDP declined from 28% in 2008 to only 24% recently, its stock market capitalization nevertheless commands 69% of the MSCI World Index.
Silicon Valley’s disruption engine has been a crucial prop to that outperformance. When most companies slashed spending in order to boost earnings, tech provided a rare shot in the arm – an inoculation against a growth-deficient world.
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The problem is now twofold. First, everyone is in on the trade. Valuations are very rich. The FAANGs (Facebook parent Meta Platforms, Apple, Amazon.com, Netflix, Google parent Alphabet) recently accounted for more than 20% of the S&P 500’s market cap. Apple alone commands a bigger weight in the MSCI World equity index than any single country apart from the U.S. and Japan.
Secondly, we are now heading into a period where the global economic outlook is improving. Investments outside the U.S. tend to catch a strong bid in this environment as confidence in the economic outlook improves. Capital becomes braver in its search for alpha. We are only in the early stages of a long journey.
Tyler Mordy, CFA, is CEO and CIO of Forstrong Global Asset Management Inc., engaged in top-down strategy, investment policy, and securities selection. The Forstrong Global Investment team contributed to this article. This article first appeared in Forstrong’s “2022 Super Trends: World in Transition” publication available on Forstrong’s Global Thinking blog. Used with permission. You can reach Tyler by phone at Forstrong Global, toll-free 1-888-419-6715, or by email at tmordy@forstrong.com. Follow Tyler on Twitter at @TylerMordy and @ForstrongGlobal.
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Content © 2022 by Forstrong Global. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited. Used with permission.
The foregoing is for general information purposes only and is the opinion of the writer. The author and clients of Forstrong Global Asset Management may have positions in securities mentioned. Performance statistics are calculated from documented actual investment strategies as set by Forstrong’s Investment Committee and applied to its portfolios mandates, and are intended to provide an approximation of composite results for separately managed accounts. Actual performance of individual separate accounts may vary with average gross “composite” performance statistics presented here due to client-specific portfolio differences with respect to size, inflow/outflow history, and inception dates, as well as intra-day market volatilities versus daily closing prices. Performance numbers are net of total ETF expense ratios and custody fees, but before withholding taxes, transaction costs and other investment management and advisor fees. Commissions and management fees may be associated with exchange-traded funds. Please read the prospectus before investing. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.
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