The writer is chair of Rockefeller International
In a telling sign, tech is the worst performing group in the stock markets this year; the best is old fashioned physical commodities such as metals and energy. Many commentators attribute these moves to rising interest rates, which tend to hurt growth stocks such as tech and help value stocks such as commodities, now magnified by fear that war in Ukraine will disrupt supplies.
But something more fundamental, long predating the Russian march on Kyiv, is going on. Historically, tech and commodities follow opposite cycles. When one booms for a decade, the other languishes. The previous big turn came in 2001 and now we are probably in the midst of another.
Data going back to the 1920s show commodity stocks rose to a dominant market position in the 1950s and 1970s, peaking at about 60 per cent of total US market capitalisation in 1980, when tech was at about 20 per cent. The share of tech and related sectors then surged to 50 per cent of the market cap by 2000, when commodities plunged to just 10 per cent.
Leap forward to today: after collapsing in the dotcom bust, the tech share rose back to 40 per cent but now appears poised for another shakeout of the overhyped and overvalued. Commodities, including energy and materials, are just coming off a record low of barely 5 per cent of US market cap and appear poised for another strong run.
Before the pandemic turbocharged investor interest in all things digital and virtual, businesses still invested more in the old economy of physical structures and equipment than in the new economy of software and research and development. But the gap had started to narrow. Finally last year, investments in the new economy surpassed those in the old economy for the first time, and now account for about 52 per cent of total capital expenditures.
Tech manias tend to lose steam when investors realise that they have been pouring money into increasingly improbable and unprofitable ideas. In…
(…)
______________________________________________________
You can read this complete story at: https://www.ft.com/content/f8e8d541-4c14-4a83-bc96-38a49a05df4f
