Redrick Terry:
It is time now for 4 Your Money. We’re joined again by John Nelson, financial advisor at NelsonCorp Wealth Management. John, welcome back.
John Nelson:
Thanks, Redrick. Happy to be here.
Redrick Terry:
Absolutely. We’re glad you’re here. So we’ve discussed on the show a number of times this year, the large disparity between different areas of the stock market. So is that something unique to this year, given all that’s going on or are there other factors at play too?
John Nelson:
Yeah, I think this year with COVID-19 has certainly accelerated some of the technologies that we’re seeing. You think about working from home, people, a lot of remote working these days, shopping online, communicating from a distance. These are all things that were well underway, but have been propelled, probably pretty significantly, given the environment we’re unfortunately facing. And it’s interesting to look back. I mean, even early 2000s during the tech bubble, 2000 and 2001, when the market dropped over 50 percent, a lot of those technologies back then, think of buying pet food online, groceries online, vehicles online, digital currencies, those were total disasters back then. It just happened that they were about 15 to 20 years too early, and we’re seeing obviously, many of those technologies taking off and have been for a long time.
John Nelson:
So I brought with another interesting graphic to just demonstrate the tech weight in the S&P 500 over the last 10 years. So just going back to 2010, we’re looking at the tech weight was 18% at that time, but grew up pretty significantly from there on out. In 2013, it got to 26% and continued to steadily grow. In ’18, when you see the decline there, that was actually a reclassification for communication services that I guess diluted some of the technology effect on the S&P 500 for that period of time. It made a steady recovery there. And if that change or classification wasn’t made in 2018, it’s easy to view that technology could be over 35% weight in the S&P 500, which is significant. So a lot of trends that were in play, this has certainly propelled things.
Redrick Terry:
And is it possible for trends like this to continue?
John Nelson:
Yeah, usually when you see things go this hard for this long, competition usually has a way of balancing things out or bringing things back to more normal levels, but software and technology is literally in every sector under the sun. It’s going to be here to stay. We’re really now looking at probably more intervention. Congress has certainly taken notice of many of these biggest players in the tech-type space where may be regulations put in play that we don’t think is much of a stretch these days to essentially control or help the domination in a sector and the monopoly that many of these have. There could likely be plenty of government intervention to help address that. So we think technology’s here to stay. It’ll just be interesting to see what some of the laws and the changes to come in the years ahead do to address some of this dominance.
Redrick Terry:
What are some broad ideas or themes that you think are most worth paying attention to?
John Nelson:
Yeah, this is a fun one for me. I think, you look at robotics, you look at energy storage. I’m a big car enthusiast, so electric vehicles and autonomous driving. These are all trends that have been well underway, but we’re really seeing massive improvements and disruption in these areas. And digital currency is another one that we’re keeping a close eye on. Again, COVID-19 has really pushed many of these forward with the developments, and it’s somewhat been a trickle so far for many of these sectors we think that are really on the edge, self-driving cars and electric vehicles, they get a battery with five, six, 700 mile range, which they are not far off from at all, that really opens the door to a whole new buyer.
Redrick Terry:
John Nelson, good stuff as always. Thanks so much for joining us. We appreciate the time.
John Nelson:
Thank you, Redrick. Glad to be here.
Redrick Terry:
And if you missed any part of our discussion, we’ll make it available to you at ourquadcities.com.