Big Tech Stocks Rise Despite Election Mayhem
November 19, 2020
Still weeks after the 2020 Presidential Election, the election results are still not set in stone. Joe Biden is looking to take the electoral vote, but Donald Trump and his campaign will not go out with a fight, pursuing legal actions against voter fraud. Heading into the election, big tech companies were expecting to take a hit in the market as lawmakers were looking to tighten regulations to crack down on fake news along with another large stimulus bill due to the coronavirus. The stimulus bill looked to hurt big tech and many other economically sensitive value stocks. Despite who were to win the election, it was not looking good for big tech stocks.
Both Trump and Biden have called out large tech companies but have failed to combat this new style of a monopoly. Should Biden be the new President of the United States, tech companies would face higher tax rates and tax-motivated selling as well as increased regulation. The increasing corporate tax rate to 28% from 21% could affect companies’ earnings. Under Trump’s administration, they are expected to continue cracking down on major tech companies to break up their near 25% hold on the stock market. With increased regulations by either party that takes power, big tech was looking to face a tough couple of coming months.
Despite the predictions for big tech, they have enjoyed boosted share prices as an outcome of the uncertainty around the election results. Regardless of who wins the election, investors want to ensure that their money is safe. The FAANG companies are the most reliable investments to seek shelter for a rocky market. FAANG is an acronym for the five most popular and best performing stocks which includes Facebook, Apple, Amazon, Netflix, and Google. As you can see, the top five companies are all big tech, explaining the up shift in the market.
The week after the election, FAANG shares were performing exceptionally well. Facebook recorded an 8% boost, Amazon and Google boosted by 6%, Apple with a 4% jump, and Netflix settled with a 2% jump. According to Eduardo Costa, a hedge fund runner at Calixto Global Investors, LP, a shift towards value stocks “is increasingly likely over the next 12 months.” If this trend stays true, investors will continue to put their money in these big tech stocks because they will capitalize on the inefficiencies in the market and get a gain in return.
“is increasingly likely over the next 12 months.”
— Eduardo Costa
Another reason for the boosts in the stock market is the fear of the next phase of the coronavirus pandemic. As winter approaches, the U.S. spiked in cases and hospitalizations and the totals are expecting to climb. Investors are buying big tech and stay-at-home companies’ stock to position themselves away from another economic slowdown. One of the main reasons shares of these companies are popular for investors to put their money during the pandemic is because the value these companies have in the stock market. These companies hold such important parts in the U.S. economy, they are basically immune to the repercussions from the coronavirus pandemic.
Overall, the stock market has been seeing an upwards trend as we wait to see the election results unfold and what the next phase of the pandemic will bring. Big tech companies look to be in the clear from a projected hit in the market. With the increasing investor trust in FAANG companies during rocky times, we see that people want to ensure that their money is safe. Big tech companies will continue to have the upper hand in the market with their dominance and safety net they provide to its investors during these trying times.
