What could Facebook’s new feed, Donald Trump’s tweets, and a cryptocurrency crackdown have to do with you and your investments?
1. Facebook reorganises your news feed
In an attempt to “fix” Facebook, CEO Mark Zuckerbeg recently announced major changes to the news feed algorithm. The update will favour posts from family and friends, shifting attention away from brands and publishers to foster more “meaningful social interactions”.
The news feed shake-up will likely impact time spent on the platform and engagement levels in the short term – a by-product that’s spooked investors and driven the company’s share price down.
What does this mean if you’ve invested in technology companies?
As billions around the world become increasingly connected online, large technology companies face more questions about their role in society; Facebook aren’t the only ones feeling the heat.
Apple, Alphabet (Google’s parent company) and Twitter have also faced backlash concerning their influence on modern day society. Some of Apple’s shareholders are even pushing for a study into smartphone addiction and its impact on children.
A key risk in the medium-long term for investors is governments creating laws to restrict what these technology companies can do if they don’t start self-regulating.
However, we believe this risk is low because most large technology companies are able to sacrifice some short-term profits to implement changes that will deliver better social cohesion.
2. 2018: The year markets stop caring about Trump?
President Trump picked up precisely where he left off in 2017: telling North Korean leader Kim Jong Un he has a “much bigger & more powerful” nuclear button, trying to convince the public he’s “like, really smart”, and offending multiple countries by referring to them as “S#!@holes”.
The difference between now and then is markets don’t seem to be as phased by his inappropriate use of Twitter, or blatant disregard for facts, geopolitical issues, and grammar.
What does this mean if you’re invested in the stock market?
Remember when Trump first got elected in November 2016? Investors worried that Trump’s unpredictable rhetoric would cause volatile share prices as the markets, which hate uncertainty, reacted to Trump’s every tweet.
After nearly a year in office, it seems the markets have gotten used to Trump’s unusual leadership style. Unless there are direct impacts on legislation (such as the recently passed US tax bill) or actual policy changes, Trump’s tweets appear to have little to impact on the stock market anymore.
3. Governments are coming for cryptocurrencies
It’s been a volatile week for coin markets (when isn’t it?) as governments from multiple countries begin to indicate a regulatory crackdown may be approaching.
Indonesia, China and South Korea are being a lot more vocal about the risks and potential banning of cryptocurrency trading.
What does this mean if you’re invested in cryptocurrencies?
History tells us countries only go to war for a handful of reasons. If something materially impacts: a community’s safety (invasions), tax (American Revolution) or their money/trade system (Opium Wars).
It comes as no surprise governments are starting to crack down on cryptocurrencies, which have the potential to sidestep the existing money system. Controlling the supply of money, legislating what is legal tender and tracking where money is being used, are powers no government in the world will likely ever give up.
We believe government regulation of cryptocurrencies will continue to increase in 2018, which may negatively impact prices of Bitcoin and other cryptocurrencies.
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