Strategy

Riding for a fall?

We consider the risks which could derail the multi-year tech boom…
Thomas McMahon
Last update 20 May 2020

Disclosure – Non-substantive Research

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

In the financial markets, the biggest winners from the crisis so far have – without a doubt – been the technology sectors. Software, hardware, ecommerce and related sectors have outperformed in the immediate aftermath (as we discussed in a recent strategy note). They also seem likely to benefit from some of the likely long-lasting changes to society that the crisis will forge.

This is the latest episode in a long period of outperformance. Looking back over the past decade, technology-related companies have tended to perform like consumer staples or defensives on the downside, and like high growth discretionary stocks on the upside: an ideal combination from the investor’s point of view.

But will this continue, and can it? In this piece we consider why technology-related stocks and sectors have been so successful and the dangers which could bring their run to an end.

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