Technology is supposed to be the answer to climate change. But as the Amazon protests in France show, leading ‘tech’ companies could be in the firing line too.
Of course, Amazon is not classified as tech. It comes under consumer discretionary: this was still the best performing sector last week. The strong performance seems perverse given the consumer spending numbers released for October.
However, last week’s commentary for the US suggested that the focus for investors could “switch to sectors that will benefit from current innovations (IoT, 5G, VR, etc)”. Retailers are a case in point, as 5G could transform ‘the shopping experience’. 5G and the IoT offer the potential for significant cost savings too.
Investment in IT can create new markets and improve existing products and services. But the competitive threat to margins will rise too. It remains a constant tug of war between ‘growth’ and ‘disinflation’. The core consumption deflator was revised down in September, from 1.67% y/y to 1.65% y/y. October saw a further dip to 1.59% y/y.
The US will continue to create jobs in 2020, but the inflation data will be key to how far equities can rise. If the core consumption deflator stays comfortably below 2.0% y/y, the Fed can continue to allow unemployment to fall, and not worry about wage inflation.
