Motamed said that most of the S&P’s 500 cash flow growth over the last five years came from only five stocks—Facebook, Alphabet, Microsoft, Amazon and Apple. “These behemoths have done great, but they are facing antitrust issues,” he said. Indeed, both political parties don’t seem to be able to agree on anything except the need to rein in Big Tech.
Besides antitrust problems, the big five tech companies could be vulnerable to margin compression. It’s the rest of the tech sector that has Motamed worried.
Many smaller tech companies aren’t making any money and their prospects for turning future profits are slim. Most are facing competitive pressures from well-financed new entrants with what for now is a virtually unlimited supply of venture capital.
Then there is the SPAC phenomenon and its influence on the ETF and index universes. A number of indexes and ETFs are throwing out real companies selling at two times sales and replacing them with SPACs selling at 12 times sales.
Investors also need to realize the wealth gap in America “has gotten so big it can’t last,” Motamed continued. “I see serious consequences arising.”
He might favor a stimulus bill that targeted those in need and was devoted to programs like infrastructure that could improve productivity. While the intentions of the plan are good, the contours of the proposed stimulus bill indicate that it is simply another scattershot income transfer program to pump money into the economy whether people need it or not.