The shift from growth to value stocks is great news for Britain, but bad news for big tech

0
L

Look across the pond and it’s easy to think that North American companies operate in a different universe, not just a different country.

Microsoft says its $70 billion Activision deal is a “metaverse” bet. Facebook and Instagram are reportedly working on “non-fungible token” plans. Jeff Bezos and Larry Page – the masterminds behind Amazon and Google respectively – both fund startups trying to “solve” aging.

Arguably all of this explains why US companies have outperformed European and UK companies over the past decade. They are always on the cutting edge of technology, looking for the next big thing, while we stick to more proven, but slower growing industries.

You could also argue that the current crop of ideas from the United States represents the peak of the market. It’s foam. Tech companies rely on growth to justify their exorbitant valuations, and so are desperate for something new to point to.

The tide could turn against them. Interest rates are about to “soar” in America, ending the era of cheap money that has helped fuel the growth of tech.

The Nasdaq fell into bearish territory this week as investors bet the good times may be coming to an end for tech. Analysts are beginning to argue that we are at the beginning of a historic shift from “growth” stocks to “value” stocks – often low-growth, but stable companies that are seen as cheap.

If so, it will be great news for Britain. The London Stock Exchange is full of value stocks thanks to its overreliance on banks, financial services, oil and gas. A lingering Brexit discount that has weighed on the market since the 2016 vote also makes our stocks look cheap. The UK stock market is the only major market up year-to-date.

I wouldn’t rule out the Americans just yet. The Big Tech giants have demonstrated a remarkable ability to reinvent themselves and have a good record of foresight. Maybe we’ll all be trading NFTs in the metaverse soon on our 150th anniversary.

If not, now might be the time to stock up on UK stocks.

Share.

About Author

Comments are closed.