NAS100/USD

Tech stocks exploded in 2020, amid megatrends like work from home (WFH) and online shopping. The uptrend continued in Q4, taking the US Nas 100 or Nasdaq 100 index past the 12,000 mark for the first time in history on November 16. Although the index eased from this level for the next few trading days, it remained above 12,000 between November 24 and December 23.

The MAGA stocks added to their gains in Q4, with Microsoft rising 10%, Apple up 20%, Google climbing 22% and Amazon adding 6%. These trillion-dollar tech giants make up 40% of the US Nas 100 index. Several other tech stocks also continued to gain in Q4. With vaccines being approved, there were speculations of pressure on these stocks. However, technology adoption is likely to remain rapid at least in Q1 next year, while the WFH and online shopping trends are expected to be more permanent, extending past the end of the pandemic-induced stay home orders. With these trends expected to continue, tech stocks are looking to be on the upside next year.

The US economy witnessed a decline in nonfarm payrolls and a rise in jobless claims in Q4. This trend could exert pressurise on tech stocks in the upcoming months. Around 245,000 jobs were added in November, down from 610,000 jobs in the prior month. Analysts expect another slowdown in job adds in December, projecting only 190,000.

US core consumer prices rose 1.6% in November, with the overall inflation rate remaining unchanged at 1.2%. Core inflation has been steady and is expected to remain so in December.

The IHS Markit manufacturing PMI came in little changed at 56.5 for December, versus November’s 56.7. Input costs rose during the month, at its strongest pace since April 2018. Manufacturers are upbeat about manufacturing activity remaining in the expansion zone in Q1. The index is projected to decline, however, to 54.3 in December.

Markets widely expect the US federal funds rate to remain unchanged at 0% to 0.25% at least through 2023. The low interest rates could provide continued support to the tech sector, with US Nas 100 likely to reach new highs in Q1 2021.

US economic growth economy is expected to slow down considerably in the fourth quarter, following a record 33.4% expansion in the third quarter. Rising covid-19 cases in the country and a new strain of virus found in the UK have brought down growth estimates for the final quarter of the year to 3.4%.

There could be a ramp up in antitrust scrutiny and data privacy regulations after Joe Biden takes office on January 20, 2021. This, along with concerns over an increase in corporate taxes, could act as headwinds for the tech giants.

Tech companies supporting WFH and stay-home trends, like video conferencing, cloud solutions, online shopping, video streaming, social media, are likely to continue benefiting through at least the first quarter next year.