Tech giants have rolled in healthy profits by providing valuable services to businesses and consumers during lockdowns, which wouldn’t have been sustainable even for a couple of weeks without fast online delivery, cloud-computing, and virtual business meetings and hangouts. But most other businesses have been clobbered by lockdowns.
The Dow Jones Industrial Average is down 5.4% this year, which understates the decline among non-tech companies like MGM (-51%), Exxon (-39%), Cheesecake Factory (-40%), GM (-29%), Wyndham Hotels (-30%), Bank of America (-30%) and Disney (-12%). The Federal Reserve during the spring helped provide liquidity to jittery financial markets, but its bond-buying spree and zero interest rates have pushed investors into higher-yielding assets. In this environment, betting on Big Tech is a rational if risky investment choice.
Lockdowns have produced record unemployment. But the $2.4 trillion increase in government transfer payments during the second quarter—from the Cares Act and benefit increases in pre-existing programs—have far exceeded the $795 billion in employee compensation. Since Americans haven’t been dining out or traveling as much, they have increased their saving or are spending more on home improvement. Home Depot’s stock is up 23% this year.