Prospects of Kamala Harris — long seen as a friend to embattled Silicon Valley as Senator of California —becoming the next vice president and going easy on regulation isn’t necessarily the next near-term catalyst for big-cap tech names such as Apple and Amazon.
But rather, it may be more cold hard cash from Wall Street being put to work.
“I think the story with technology stocks is one based on fundamentals. These are companies with extremely strong revenue growth and very strong free cash flow as well. This was true before the pandemic. It has shown to be even further amplified by the pandemic with very strong earnings results from a lot of these tech companies in the second quarter. I think a catalyst for another leg higher for tech is honestly all of the cash we still have on the sidelines,” JPMorgan Asset Management global market strategist Gabriela Santos told Yahoo Finance’s The First Trade.
Santos continued, “When we look at money market funds we will have a trillion extra dollars sitting there than we did pre-pandemic. So there is still some money that could be put to work and technology certainty is a big winner here.”
To be sure, big-cap tech continues to be one of the most teflon trades in the entire stock market.
This week alone Apple crossed the $2 trillion market cap level for the first time on optimism regarding a 5G iPhone super-cycle. That has some on the Street speculating on a $3 trillion Apple valuation sooner rather than later.
Apple’s stock is up a cool 68% year-to-date.
But the tech trade hasn’t solely been relegated to Apple. Money has piled into Facebook, Amazon and Netflix on the view their business models will stay strong no matter the length of the COVID-19 pandemic. In other words, investors are seemingly willing to pay whatever valuation is out there to own companies driving the future of how we live.
The NYSE FANG+ Index — which measures the performance of 10 highly traded tech stocks such as Facebook —has gained 65% this year. More than half of that appreciation has come in the past six months.
“With this unprecedented COVID-19 pandemic causing a near-term consumer/enterprise spending abyss, the FAANG names have been viewed as relative safety blankets in this scary Category 5 storm. These tech behemoths are both defensive and offensive names for investors, as the re-rating for these secular growth stories continues to play out in the market with no signs of slowing down in our opinion,” Wedbush Securities tech analyst Dan Ives says.
Ives thinks the FAANG cohort has at least another 25% further in upside potential. That’s excluding a former vice president Jo Biden-Harris win.