Market Insights • Archive Perspective

Crossing the Rubicon: A Digital Proof of Concept

The liquidity provided by the Fed has been a catalyst for higher prices, backstopping debt markets to ensure they run smoothly. But I don’t believe the market is as strong as the headlines make it seem. The S&P is being driven by a handful of names.

Many stocks are 25%-50% off their highs. Unfortunately, the stock market doesn’t capture the real damage that’s being done to small businesses not in the index.

COVID-19 as a Digital Catalyst

In my mind, COVID-19 has become a ‘proof of concept’ that the world can live its life digitally, at scale. Grocery shopping, working from home, education, and e-commerce have all simultaneously become part of our collective digital experience. We’ve crossed the Rubicon; the shift has been accelerated and is just beginning.

Fortunately, we were positioned for this. Many of our investments provide the tools needed to enable the shift. Companies like ServiceNow, Nvidia, Shopify, PayPal, and Square are all poised to benefit from this shift, which is still nascent.

Bonds vs. Equities: The Yield Trap

Giving the government money for ten years and getting back 60 basis points is not very exciting. In fact, its real return is negative. As an asset class, bonds could be more dangerous than equities.

Equities as an asset class will play an ever more important role in allocations. Companies that enable the transition the world is undergoing will do well despite the economic turmoil. I’m sure there will be more volatility, but over time, stocks will move higher.