Recessions? Depressions? Pandemics? Not according to global share prices, particularly tech shares.
Yesterday marked the fourth consecutive day of gains for the MSCI All-Country World Index. And with that, the global basket of stocks has recouped all of 2020's COVID-19 driven losses, which saw the index down more than 30% for the year in mid-March.
Created by MSCI Inc, the All-Country World Index corresponds to the performance of more than 2,700 small to large-cap stocks around the world. These stem from both developed and emerging markets.
The Index was buoyed by another strong performance in the United States share markets yesterday (overnight Aussie time). All three major indices closed in the green.
The tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) led the charge, up 1.0% for another new record high. Year to date, the Nasdaq is now up more than 22%.
Amazon.com, Inc. (NASDAQ: AMZN), Netflix Inc (NASDAQ: NFLX), Alphabet Inc Class A (NASDAQ: GOOGL), Microsoft Corporation (NASDAQ: MSFT) and Apple Inc. (NASDAQ: AAPL) all posted strong share price gains.
The 3.5% rise in the Apple share price yesterday brings the company's market capitalisation to within a whisker of US$2 trillion…closing the day at US$1.95 trillion (AU$2.7 trillion).
Soaring tech share prices have seen the Nasdaq gain a stellar 62% since its 23 March low. With this rapid gain in mind, Ryan Detrick of LPL Financial — the largest independent broker-dealer in the US — sounds a note of caution. As quoted by today's Australian Financial Review, he said: "Technology is probably extended in the near-term, but when you look at how strong earnings and guidance have been from the group, you realise there's a reason the Nasdaq is at 11,000 and why eventual continued strength is quite likely".
The important takeaway here for long-term investors is that while there could always be some retractions in the booming tech shares' prices, their longer-term growth outlook remains strong.
Exploding demand for digital data sees the Nextdc share price skyrocket
It's not just US tech shares that are enjoying booming share prices.
Australian data centre operator, Nextdc Ltd's (ASX: NXT), share price has rocketed more than 82% year to date. Today's Nextdc share price brings the company's market cap to $5.46 billion.
Specialist investment manager, Alceon, was onto the trend that's seen a surging demand for data storage early. Daniel Chersky is the portfolio manager for the Alceon High Conviction Absolute Return Fund, which is up 13% year-to-date.
As reported by Bloomberg, Chersky says that Nextdc was one of the fund's first picks in 2017. He commented that it has since "been a main driver behind returns seen during the coronavirus pandemic". He went on to say that "All of us working from home, shopping from home and doing everything online benefits the data-center industry. People are realizing that data centers are core infrastructure assets".
Chersky believes the shift towards cloud services is still in its early days, with decades of growth still ahead for tech shares like Nextdc.
Long-term investors take note.
Moving on…
ME Bank's research flags caution with high flying BNPL tech shares
The share prices of Australia's high flying buy now, pay later (BNPL) companies could come under pressure as consumers' spending habits shift under the impacts of COVID-19.
According to new research from ME Bank, announced in a press release this morning, the number of Australians using BNPL services declined 3% during the six months to June 2020, falling to 13%. That compares to 16% using BNPL during the six months to December 2019.
Credit card payments, on the other hand, remained the same. 46% of respondents said they'd borrowed on credit cards over the past six months.
Commenting on the results, ME General Manager – Personal Banking, Claudio Mazzarella stated:
"It doesn't matter how innovative the lending method is, most Australians are wary of getting into more unsecured debt in the midst of a global and domestic economic crisis. Buy Now Pay Later certainly hasn't replaced the credit card yet. Credit card usage is holding steady while Buy Now Pay Later is dropping.
Most Australians are financially savvy. They know spending is spending, and debt is debt. Many households have taken a severe financial hit to incomes and been forced to cut back on spending, or they're prudently waiting to see how this pandemic plays out before borrowing more.
The average Buy Now Pay Later user is younger and less financially comfortable. They may be wary of credit cards in general or unable to qualify for a credit card".
With leading BNPL shares like Afterpay Ltd's (ASX: APT) share price up 131% so far in 2020, and rival Sezzle Inc's (ASX: SZL) share price up a sizzling 355%, these shares could come under pressure if this trend takes holds.
