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Over the past few years, easy monetary policy worldwide hasn’t been enough to fully revive global economic growth. It has, however, helped to catalyze a strong equity rally, concentrated in a fairly small number of stocks — many of them technology and e-commerce businesses — that have been able to consistently “outgrow” the sluggish global economy. This rally has been aided by the advent of growth-focused ETFs, index funds, and smart beta products, along with (more recently) the US day-trading phenomenon that has accelerated amid COVID-19.

But we think the world is starting to change. Driven by unprecedented levels of monetary and fiscal stimulus in response to COVID-19, the economic growth outlook is improving. Commodity and interest-rate markets are grappling with…

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Naveen Venkataramani
Naveen Venkataramani
Equity Research Analyst
Singapore
Namit Nayegandhi
Namit Nayegandhi
Equity Research Analyst
Singapore
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Citing consumer welfare and competition concerns, a rising chorus of voices is calling for more government regulation of the most dominant players in the US technology sector. As recently as late 2019, the co-founder of one household tech name even opined that government should step in and regulate the tech giants. The sector’s perceived impact on the upcoming national elections has helped fuel what some observers describe as growing “anti-big-tech” fervor.

So, what might come of it? It depends who you ask, but in my view, probably not a lot. I think federal privacy legislation will be on the roadmap if an agreement can be reached, but changes to antitrust law and/or content regulation seem…

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Brian Barbetta
Brian Barbetta
Global Industry Analyst
Boston

The COVID-19 pandemic has represented a near-perfect storm for the world’s leading technology companies. Both earnings growth and valuation multiples have risen to extraordinary levels. Naturally, this raises questions about the sustainability of the current dynamics and the prospective risks and opportunities for investors.

The enduring case for tech

The technology sector’s strongest companies were already executing at a high level coming into 2020 — growing fast, expanding margins, and reinvesting in their value propositions. The COVID-19 pandemic has accentuated these characteristics by accelerating the need for consumers and enterprises to digitize. In addition to the COVID-19 tailwind, I think these firms deserve significant credit for their agility and decisiveness — as both attributes have allowed them to pivot quickly to capture these growth opportunities. Furthermore, I believe these companies’ unprecedented…

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Daniel Pozen
Dan Pozen
Equity Portfolio Manager
Boston

Calls for the impending collapse of growth equities, particularly tech stocks, are getting louder as the market marches higher and the share of the biggest tech players grows larger. Recent investor concerns have focused on frenzied retail trading, high trading volume generally, and the dramatic rise in valuations since late March.

I agree that valuations among the tech leaders are at expensive levels relative to their history. I also concede that the growth segment of the market has taken on some speculative characteristics of late. However, what to do about it is another matter entirely. Go into cash at 0%? Rotate into bonds yielding 60 basis points? Move into more defensive equity sectors? Shift from growth- to value-style investing?

My answer is to not wholesale exit the market, but rather to reassess…

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Nanette Abuhoff Jacobson
Nanette Abuhoff Jacobson
Global Investment and Multi-Asset Strategist
Boston

In many ways, the COVID-19 crisis has fundamentally altered the way we live and work (and continues to do so). From an investment standpoint, that has been a big catalyst for long-term value creation across certain sectors. The technology sector is a notable case in point.

A day in the life of a tech analyst

To illustrate, consider how my own life has changed over the past several months:  

  • I do my job from my home office in my living room these days — investing, researching, collaborating. The transition to working remotely has been seamless.
  • Not only am I just as productive as I was in the office, but I save time and money by not having to commute every day.
  • Meanwhile, I can “go to” a doctor’s appointment without leaving my house, using telemedicine capabilities.
  • I can do all my banking online, with the same functionality as if I went to a physical branch location.
  • I can shop online using my mobile wallet and have my groceries or other purchases delivered to my door.
  • After calling it a day, I can spend the evening watching a movie of my choice or playing a video game.

All of this is enabled by technology. None of it is new per se, but what has changed on the back of COVID-19 is the speed and alacrity with which…

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Bruce Glazer
Global Industry Analyst
Boston

Innovation may be an overused term these days, but in the world of investing, we believe it is critical to unlocking opportunity and long-term outperformance potential. So how should investors frame their thinking around innovation – and (more to the point) how can they seek to capitalize on it?

Innovation is broad and comes in many forms. 

Truly innovative companies tend to control their own destiny by carving out a new industry or meaningfully altering the playing field in an existing industry, potentially allowing them to grow revenues and profits far longer than expected through varied economic environments. Innovation can often be found in novel processes, game-changing technologies, new products/services, or business model changes that allow a company to… 

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Brian Barbetta
Brian Barbetta
Global Industry Analyst
Boston
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