Not In A Safe Space
It’s true that the fate of tech stock ($COMPQ) in the short-term is up to the whims of geopolitics. When relations heat up, tech stocks have a tendency to sell off, and capital retreats into safer havens.
Tech stocks aren’t exactly the safe place for capital, and investors are rewarded with higher-than-average growth rates while they have skin in the game.
This is what makes tech stocks so attractive, even if some investors personally hate the individual companies and what they do.
With the dollar cratering from the new administration’s stance on global trade, there is an argument out there that they can’t do much more in the short-term without breaking the tech market.
I found it fascinating that tech stocks and the US dollar have rallied big time in the short-term forcing gold to back down from going parabolic.
Washington calling out Federal Reserve Chair Jerome Powell is also an interesting tactic.
We have been stuck at the 4.25% fed funds rates for some time, and badgering Powell to lower rates almost forces him not to so he can keep up the optics of integrity.
The ironic reaction to this is that the government will most likely try to heat up the economy in the short-term to finally force Powell to cut rates.
We still have a mountain to climb for that to happen, which could indicate that the pain trade is higher.
We have been stuck in no man’s land for quite some time, and that is good for tech stocks.
It is only good in a way that is relative to other industries that can’t handle this type of environment or interest rate.
The likes of Meta, Apple, and Microsoft keep chugging along, printing money, but haven’t done anything exemplary to justify any seismic investment. It helps that they are quasi-monopolies.
So, if in the case that Washington doesn’t want to break the tech market, we could be in for a further rally with the tide lifting all boats.
It is hard to understand why they would want to tank the dollar even more than it has, simply because we start getting into murky territory where investors could believe this is the end of the dollar.
A sharp rally could reclaim the US dollar as the king of global currencies at a time when investors are flabbergasted at the spike in the price of gold bullion.
Investors are indeed cheering for volatility to cool down, and that could be the wind at the back of tech stocks in the short-term.
Powell even said we may be entering a period of more frequent, and potentially more persistent, supply shocks, but Washington has a strong incentive not to crash the economy.
As if a cry for help from the tech sector, the government in the Middle East is doing tech deals to quell the rebellion.
As part of an economic partnership with Saudi Arabia that could see the kingdom invest $600 billion in US companies, NVIDIA will supply advanced AI chips to the country’s new AI venture Humain, while major tech firms including Alphabet’s Google, Oracle, and AMD will invest USD 80bn in transformative technologies in both countries. Additional deals with Qatar and the UAE are also expected.
I would slowly wade into tech stocks, but not bet the ranch.
