Investors Are Celebrating the Tech Revolution

Why have U.S. stocks risen so high over the past year? That debate has focused on the costs of Trumpian instability versus the benefits of corporate tax cuts, but there’s another important angle: Investors now seem to think that steady growth and low inflation are compatible going forward. That’s largely because the tech revolution has taken positive turns toward a future of diverse and highly useful platforms, rather than monopoly and high prices.

Gross domestic product growth for the last two quarters was over 3 percent, even in light of hurricane damage in August and September, and middle-class income growth has resumed. You might think that would mean high price inflation from credit growth and “overheating,” but the 12-month change in core prices for personal consumption expenditures has fallen to 1.3 percent.

Quite possibly the American productivity drought is over. There are major technological changes on the way — Waymo, the autonomous car unit of Google parent Alphabet Inc., premiered this week in Arizona a car that doesn’t have a human in the driver’s seat at all.

Low rates of inflation, however, reflect productivity gains that already are here. The tech giants — Google, Amazon.com Inc., Facebook Inc. and Apple Inc. — have become major managers of our information, our businesses and our lives. They’re meeting political resistance, but whatever you think of those complaints, they are signs the major tech companies are having transformative effects. I used to say that we are overrating what tech has done for us to date, and underrating what it will do in the future. Perhaps reality has caught up with that prognostication.

Amazon, for instance, is no longer just a wonderfully convenient bookseller and retailer, but a leader in cloud computing, artificial intelligence and warehouse logistics, and perhaps soon in drones. The major tech companies are growing their platforms quickly, supporting low prices with scale, product diversity, data ownership and superior service. Hardly anyone today worries about the eventual disappearance of competition and monopoly prices from Amazon or the other major tech companies. Do you really think Amazon is going to double book prices five years from now? There are too many other ways to access the printed word, and so it’s more likely Amazon will profit by continuing to grow its other business lines. Similarly, even though Apple’s iPhone X is a…

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