Via a Goldman Sachs analyst research note ICYMI (on Friday) covering huge technology shares like Facebook, Apple, Amazon, Microsoft and Alphabet (Google).
GS nominate risk #1 as higher taxes, commenting on plans from the Biden administration for higher corporate and capital gains tax rates:
- proposed corporate tax rate hiked to 28% (note that Biden has indicated a 25% compromise rate)
- “FAAMG stocks have appreciated by $5 trillion during the last 5 years, accounting for 29% of the S&P 500 market cap increase during that time” ... and thus a drop in these stocks will have an outsized impact on index values
#2 is the 'higher interest rates' usual suspect:
- low rates have been a key support for valuations for over ten years now
- the time of near zero rates could be approaching an end though
- "All five FAAMG stocks ... are especially sensitive to moves in long-term interest rates"
#3 is increased regulation ... GS go as far as to say "Looking forward, the greatest fundamental risk to the continued market leadership of the five largest companies appears to be the potential intervention of regulators
- ... legal battles and investigations over their market power and competitive practices ranging from commercial litigation to DoJ and FTC antitrust lawsuits to Congressional probes"
GS do note on #3 though that Google has soared since the launch of the DOJ investigation (in October 2020 ... price from circa $105 to circa $135).
