How the US election could impact the Amazon and Apple share prices
We examine some of the ways in which the US election could impact Amazon, Apple and Big Tech more generally.
Big Tech’s Big Problem
Has Big Tech’s near unstoppable success over the last decade been a result of inherently superior business models and products; or uncompetitive behaviour and a regulatory framework that simply isn’t fit for purpose?
Big Tech, after all, has been a dominant force in equity markets over the last half a decade – with Apple, Microsoft, Amazon, Facebook and Alphabet growing to account for more than 20% of the S&P 500 benchmark. Moreover, in that period Facebook’s share price has risen an astounding 162%, Alphabet 104%, Amazon 405% Apple 272%, and Microsoft 285%.
Yet as the US election approaches – and the prospect of a clean sweep for the Democrats looms as a possibility – one is left wondering what kind of impact that outcome, among others, it may have on stocks such as Apple and Amazon.
The democrats, to be sure, have taken a relatively critical stance on Big Tech in recent times, with the Justice Department (DOJ) recently launching what many believe to be a long overdue anti-trust case against search giant Alphabet – parent company of Google.
The purpose of the suit, according to the DOJ, is to ‘stop Google from unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets and to remedy the competitive harms.’
‘As with its historic antitrust actions against AT&T in 1974 and Microsoft in 1998, the Department is again enforcing the Sherman Act to restore the role of competition and open the door to the next wave of innovation—this time in vital digital markets,’ the DOJ added.
History may not repeat itself, but it certainly rhymes.
As if to highlight the ever-confounding nature of equity markets, the Alphabet (GOOG) share price actually rose after the DOJ suit was announced, with Bloomberg running a story titled: ‘Here’s Why Google Shares Rose After the U.S. Antitrust Suit.’
Apple and Amazon share prices: Should Big Tech be nervous right now?
If we were to see a clean sweep by the Democrats – that is a Biden victory and the Democrats taking back control of the Senate – ‘big tech should be very nervous’ according to investor and political strategist Bradley Tusk.
Mr Tusk, Chief Executive of Tusk Ventures, in a CNBC segment, went on to say that:
‘People assume Congress is so incompetent and so inept and Big Tech companies are so smart they’ll figure out how to stop them,’ while adding that ‘I don’t know if that’s the correct assumption. You could certainly see left-leaning anti-tech proposals have much more of an impact in Washington starting next year.’
The current odds
According to CNN polls, Joe Biden is currently the favourite to win the 59th Presidential election, with CNN Polls showing that among likely voters: 54% favour Biden while just 42% favour Trump. Betting odds corroborate such a view, with Sportsbet showing odds of 1.50 for a Joe Biden victory and 2.70 for a Trump victory.
Despite those odds and polling statistics, Seema Shah, Chief Strategist at Principal Global Investors, recently argued that to a degree, it is inconsequential who wins the presidential race or who takes control of the Senate, noting that:
‘We expect the assault on Big Tech to continue regardless of who wins, but at the same time believe that action in the form of legislation is likely to be a process measured in years rather than months.’
Other bits and pieces
Looking at the deeper implications of a Democratic sweep – Mr Tusk, looking at the implications around the DOJ’s unfolding case against Alphabet – said:
'Under democratic control the justice department will not be satisfied going after just one company...so whether your Facebook, Amazon or Apple, you should worry about that.'
What impact – if any – this may have on the share prices of the likes of Amazon or Apple however remains uncertain. Analysts are seemingly paying little heed to such an outcome, with the average analyst price target on Amazon implying potential upside of 17% from the stock’s last close.
The spread between the last traded price and the average analyst price target for Apple is significantly lower – with analysts currently projecting upside of ~9% from current price levels for the consumer-focused tech giant.
Mind you, even if Biden wins the presidential election – as CNN polling and Sportsbet’s odds currently suggests – JP Morgan analysts at the start of the year highlighted the difficulties that the democrats may have in taking back the Senate, with it being noted that ‘For the Democrats, their chances of winning back the Senate appear slimmer, with only 35 of the 100 Senate seats up for re-election this year.’
JP Morgan analysts also confirmed what appears to suggest an anti-markets slant of a Democratic president, saying:
‘Markets have also tended to react more positively in the immediate aftermath of the election of a Republican president, as the party’s policies are broadly thought of as more market friendly.’
Ultimately, with Big Tech making up more than 20% of the S&P 500 – one is left wondering how much the market as well as individual tech names such as Amazon or Apple would fall (or potentially rise) should Biden win or the Democrats take back control of the senate – or both.
How to trade Amazon and Apple long or short
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