Going Long A Dangerous World
If you can discern a theme du jour amid rampant macro ambiguity in the early days of 2023, the prevailing market narrative revolves around the notion that rest-of-world exposure may be preferable to US equities.
To the extent one side of that trade is predicated on a negative view of large US tech firms, that side feels a bit "late." 2022's bear market was a tale of multiple compression catalyzed by sharply higher rates, and that obviously impacted high-growth shares disproportionately. Mega-ca
H
I’m still letting your casual aside about the dissolution of the EU currency union sink in. I instantly formed this image of thousands of FX traders running around trying to set values for all the returning currencies like the Lira and the Franc, etc. What a blast the first few months would be.
Mega cap tech still seems like the right play to me. They’ll continue to print money and have cut costs significantly with the layoffs (not to mention other areas where I’m sure they’re cutting costs). Going forward, the wages they pay will be flat or even down as talent floods the market from all the layoffs. On top of that, any interest rate reductions provide a tailwind. However, even if interest rates continue to rise, that’ll be a great opportunity for these companies to buy back stock at lower prices. Annnnddd as I mentioned before, generative AI could drive a lot of demand for computing resources that Amazon and Microsoft are well-suited to take advantage of including Microsoft integrating it into their products. I see a lot to like with mega cap tech.
Food for thought.
I never sold my big cap tech- Apple, Microsoft, Google, Broadcom, Nvidia, Amazon and QQQ. However, I will admit that I have an unusually large tolerance for pain- of almost all types.