Why Are the Public Markets Strong When Unemployment is Terrible? Answer: The Cloud

Q: Why are investors doing well while unemployment is terrible?

Because The Cloud continues to perform well during these crazy times.  And the public markets have become … The Cloud.

While a little dated, this is my favorite visual representation of the S&P 500. It has become The Cloud:

The Cloud was already growing fast. It is, for now, growing even faster during Shelter. For now at least, Microsoft and Amazon are on fire, and even with some segments of advertising under pressure, the Cloud businesses at Alphabet and Facebook and Apple are stronger than ever. These 5 make up a huge amount of our U.S. total market cap.

And “smaller” folks like Zoom, Shopify, etc. are experiencing an acceleration due to the radical changes:

The economy overall is a disaster today. Unemployment + semi-employment is over 20%, and may even be close to 40%.

But it is still functioning. And the strongest segment is Cloud. Cloud devices. Cloud entertainment. Cloud IT and infrastructure. Cloud commerce.

That’s a bet the market seems to be comfortable in continuing to make. Especially when the U.S. is injecting trillions of dollars into the overall economy, the relative winners will benefit.

Published on May 10, 2020

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