Good morning, Jack here.
With news that Apple is now worth more than the entire FTSE 100, perhaps it’s not surprising to see a sharp pullback in US and China tech shares overnight.
Around $150bn has been wiped from the company’s market cap - an entire Unilever up in smoke - down 8%, with Amazon and others down c4%. The fall has to be placed in context - US equity markets have rallied by more than 50% since March as institutional money flowed back into big tech. The correction looks to have spread to China too. It’s not surprising to see some profit taking given equity market performances since March/April.
As we head into Q3 of a frankly astonishing year I’ve been doing some thinking (dangerous, I know).
Mostly I just look for small, well-run companies that can become much bigger in time - but recent events have been so significant that they might trigger some fundamental changes in market dynamics. So I’ve been grappling with slightly more macro considerations.
Maybe a better way of saying it is certain trends are becoming more entrenched: currency debasement; big tech and the High Street demise; increased data and IT support as more people work from home; the possibility of increased fiscal spending, etc.
Out of everything, maybe the most important dynamic is zero/negative interest rate environment monetary policies. QE has exploded recently. Central banks are regularly sending out tidal waves of cash. Everything between the Great Financial Crash up until the start of 2020 looks like child’s play compared to the post-COVID binge witnessed over the past few months.
This is a powerful driver of gold and silver. I want more portfolio exposure to these metals because I personally think spot prices there have further to run. Then there are other long term growth markets. Other metals such as palladium and copper might be worth a look.
Software and IT - Computacenter is hitting all-time highs as business booms. Gaming is a huge and maturing global industry. The UK punches above its weight here with several listed plays, although valuation remains a concern.
And then putting thematic thinking to one side, there are some attractive bottom-up valuations in UK equities. UPGS has trebled since March and so has Gear4Music. There are solid operators out there that still have yet to recover, such as…
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