Are Technology Earnings Poised To Outperform?
- The global pandemic created enormous headwinds to growth for a global economy that was already struggling.
- Despite the recent bounce-back in equities and improvements in the economic data, COVID related headwinds will remain in place, negatively impacting EPS growth and share buybacks for years to come.
- The COVID pandemic has accelerated the adoption of technology solutions, a trend we expect to see continue as additional thematic tailwinds support future growth opportunities and new disruptive technologies take hold.
Coming into 2020, growth had already been elusive for years in much of the global economy. For investors, this meant that stock price appreciation was increasingly reliant on multiple expansion and the financial engineering of share buybacks, while those areas that generated genuine growth enjoyed even greater share price tailwinds. As is often the case, in 2020 the global economy got exactly what it was least prepared to handle in the form of a health crisis which led to a record-breaking economic crisis. Demand in some sectors fell by nearly 100% almost overnight while some, particularly those in technology-related areas, were relatively unharmed or even benefited from the lockdowns as consumers and businesses embraced technology-led solutions at an accelerated pace.
