US president-elect Donald Trump is expected to spend lavishly on infrastructure and relax financial regulation.
As a result, a number of old-economy stocks have staged a quick recovery recently. By contrast, US internet giants have tanked as Silicon Valley prepares for uncertainty under a Trump administration.
The Dow Jones Industrial Average has surged 5.5 percent since Trump won the election, led by old-economy stocks such as infrastructure, property, finance and energy.
However, new-economy shares have suffered, with internet firms Amazon, Google, Facebook and Apple leading the fall. Even Chinese internet companies including Alibaba and Tencent have weakened.
Trump opposes cheap foreign labor in the IT sector and wants to levy an online shopping tax, as well as stop Amazon and Apple from evading taxes.
Apart from Peter Thiel, a board member of Facebook, most Silicon Valley executives supported “anyone but Donald Trump”.
It’s widely expected that Trump’s victory will upend the way Silicon Valley works.
The power of the US president is checked by Congress. President Barack Obama was forced to make considerable concessions in order to push through Obamacare. Trump will be subject to similar constraints.
Also, it’s believed that a lot of things Trump said during the campaign are just slogans designed to win votes and are unlikely to happen.
New-economy companies such as Amazon, Google, Facebook, Apple and Microsoft are a key part of the nation’s economy.
If Trump successfully grows the economy, they, too, will gain.
For instance, when households have more disposable income, people tend to buy more consumer goods through Amazon or upgrade to new iPhone models.
Big brands will also spend more on online advertising with Google or Facebook as their sales revenue grows.
We are unlikely to see internet firms suffer if US economic growth picks up steam.
In fact, the biggest potential damage for the US technology sector is that Trump is more conservative in embracing new technologies than Obama.
But that is going to hurt startups rather than the entrenched players.
In that case, the recent sell-off in US tech stocks may be just a technical correction and probably a good opportunity for investors to buy.
This article appeared in the Hong Kong Economic Journal on Nov.16
Translation by Julie Zhu
[Chinese version 中文版]
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