US market fall pricks bubble of smug bulls
We need to look beyond baby-boomer stocks like healthcare and start paying attention to millennials
THURSDAY’S ugly smackdown in US stock markets erased nearly all of their gains for the year, confounding the many pundits who predicted July and August would be a season of bullish complacency.
Not everyone is totally comfortable with the teetering heights of the S&P 500 and Nasdaq. That includes US Federal Reserve boss Janet Yellen. A fortnight ago, she pooh-poohed fears that property, shares and bonds were bubbles in peril of popping. But she warned that the social media and biotechnology sectors had attracted irrational exuberance.
Valuations on some ventures mirrored the run-up to the last great hi-tech bust, and prices were due a healthy correction.
The bullish camp acknowledges the pockets of froth, but counters that large biotech and social media companies are now mature and able to demonstrate their earnings potential — hence unlikely to precipitate a general market meltdown.
Bulls also say appetite for hot start-ups has not dwindled. Goldman Sachs has pinpointed exactly what angel investors, speculators and early adopters crave in an initial public offering: Smac.
Smac stands for social, mobile, analytics and cloud. While many such listed enterprises were duly clobbered after Yellen’s comments, they remain the single brightest spark of hope for the US stock market.
Pardon the jargon, but Goldman Sachs says “software solutions” developed by these firms “enable businesses to realign go-to market models with faster and informed decision-making driving an enhanced user experience”.
I think this translates into using big-data algorithms to help companies find value in the massive chunks of customer information they hold in their mainframes. Once typical buying behaviour or trends have been identified, the job of managers, product developers and marketers is made easier and more profitable.
It is very much a new-age field, particularly since data is being collected and stored at an unprecedented rate — not just via billing records and website traffic, but by the “internet of things” that includes everything from smart television, fridges and air-conditioners to vehicle monitoring devices. Naturally a lot of excitement surrounds Smac, and the prices of many listed companies have been driven into the stratosphere.
InvestorPlace.com reckons all investors should be “watching demographic shifts as you craft your long-term strategy”. The website suggests we look beyond babyboomer stocks such as healthcare and insurance, and start paying attention to millennials (born between 1980 and 1995).
Research on this demographic group shows what they don’t want or need right now: cars, cable television, homebuilders, bricks-and-mortar retail and soft drinks. Does that portend a big crash? Depends on your level of Smac addiction, I guess.