Increasingly, investing in tech companies means you need to go big or go home. What we mean is that large cap tech companies have been outperforming their smaller peers handily. The S&P 500 Information Technology Sector is up about 14% this year, much better than the index’s 3.7% overall gain, but the S&P 600 Information Technology Sector has only gained 9.9%. That means that the largest tech company are significantly outperforming their smaller peers.
FINSUM: This is not a surprise given the overall momentum the FAANGs have had over the last few years. However, given the worries over regulation, it is odd to see they have outperformed smaller rivals very recently.
Fidelity appears to be on the verge of making one of the most important adoptions of cryptocurrencies by a major financial player to-date. According to Business Insider, Fidelity has just posted jobs on its site looking to hire people “to help engineer, create, and deploy a Digital Asset exchange to both a public and private cloud”. According to BI, “If Fidelity does launch a crypto exchange offering, it would arguably be among the biggest moves by a large Wall Street firm into the nascent crypto market, which stands at about $350 billion”. Fidelity already allows clients to see their crypto holdings alongside their conventional assets.
FINSUM: It sounds like Fidelity is planning to opening a crypto trading exchange. That would be a very important move to legitimate the asset class.
Over the last few months there were growing fears that the US tech industry, a stock market stalwart, might be poised for a damaging crackdown by regulators. This fear had somewhat subsided in the last few weeks as no new worries had arisen, until now. Treasury Secretary Mnuchin has just now called for an anti-trust review of the US tech industry following a 60 Minutes story on Google’s monopoly power. Mnuchin said the power to do so was not part of his mandate, but that someone in the government needs to be looking at the issue. “These are issues that the Justice Department needs to look at seriously — not for any one company — but obviously as these technology companies have a greater and greater impact on the economy”.
FINSUM: This is a very worryingly development for the tech industry and its investors, but not one we think is unwarranted. We suspect this is going to wound tech stocks, especially if the idea of an anti-trust review gets traction in Washington.
Sometimes a story is just so out there that you have to cover it, and today that story is about Uber. Last year a self-driving taxi fleet sounded progressive, but Uber announced this week that it is planning to launch a flying taxi service by 2023. The company is planning to work with NASA on an urban air traffic control system and it debuted a vision of greatly scaling up aircraft manufacturing. Uber believes airplanes could be built with such scale that the cost of a commute in a flying tax would be the same cost as their ground transportation today.
FINSUM: This is quite an ambitious vision! We suspect it will take at least a decade longer to achieve this plan, but it would certainly be revolutionary.
One of the elements that has been weighing on technology companies this spring has been the threat of regulations. To judge that risk, Barron’s interviewed a number of Wall Street Analysts to get their views. Overall, the consensus was that future regulatory risk for fangs was muted. One managing director for Canacord Genuity commented that, “Facebook management addressed important data and privacy issues head-on, outlining new disclosure standards for political ads and hiring aggressively against privacy initiatives.…For the time being, the worst is very likely behind Facebook stock.”
FINSUM: We tend to agree here. We do not see the government taking major action, and the worst seems to be behind tech companies, for now.
Despite a very poor three months, there have been increasing amounts of articles arguing that Bitcoin may be a tipping point where it moves higher. However, Bloomberg has published a piece saying it is at a so-called death cross. The cryptocurrency’s 50-day moving average has dropped to its nearest point to its 200-day moving average in nine months, a move which spells doom for technical analysts. If it crosses below the 200-day threshold, it would signal the “death cross”.
FINSUM: While this does seem significant, we would argue that technical analysis is not as relevant in Bitcoin. The reason why being that the fundamentals of the market (e.g. a sound regulatory environment) are unstable, and there is little trading history from which to weigh technical indicators.