Here’s what’s going on in the stock market right now.
The world is getting back to “normal.” Restaurants, retail stores, gyms, entertainment venues, hotels… they’re all opening back up.
In theory, this means more dining out and less ordering food through DoorDash. It means visiting the mall in person and shopping less on Amazon. It means going back to working out at a gym and less time spent on the Peloton. It means returning to bars and hanging up the Netflix addiction.
So, to play this “Great Reopening” and concurrent shift in consumer behavior, investors are ditching the technology stocks that have dominated the market over the past year and piling into the physical economy stocks that have lagged.
At the same time, 10-year Treasury yields are rising sharply in anticipation of a strong economic rebound and recovering inflation. This is putting outsized downward pressure on richly valued tech stocks and exacerbating the tech sector meltdown we are seeing today.
When push comes to shove, it’s that simple. That is what is going on in the stock market today.
Now, reading that, you’re probably thinking to yourself: “OK… if true, then it’s time to join the bandwagon, ditch FANG, and buy Carnival, Nordstrom, and AMC!”
That trade may work out just fine…
But here’s the problem I have with that investment strategy: It’s so short-term in nature!
Sure, folks are going to go back to Nordstrom, Kohl’s, and Macy’s with greater frequency in 2021 than they did in 2020. That’s just what happens when a closed economy reopens.
But that alone does not change the future growth prospects of old-hat companies.
Consumers are shifting to online shopping because it offers superior convenience (you don’t have to leave your home), it’s faster (you can complete a shopping trip in minutes by browsing through apps or websites), and it offers a better selection (in store, you are limited by the inventory of that store; online, the internet offers infinite inventory).
Those advantages remain as true in 2021 as they did in 2020.
The main distinction to draw is that the technology underlying e-commerce is only improving.
Now, thanks to advancements in augmented reality, you can virtually “try on” outfits, or see how pieces of furniture fit in your living room or take an in-depth virtual tour of a home or a car. This AR tech will only keep improving until, eventually, “seeing” products online will be nearly equivalent to seeing them in store.
Also, thanks to advancements in data analytics and machine learning models, e-retailers are now able to personally customize your online shopping experience, so that the clothes, cosmetic products, cars, or homes you view online are perfectly tailored to your needs – whereas a physical store must tailor product selection to the needs of everyone that visits the store. There is no personalization. This ML tech will keep improving until, eventually, online shopping is perfectly personalized, so consumers are always finding their favorite products almost instantly.
Even further, thanks to improvements in natural language processing technology, e-commerce platforms can now employ a new class of smart “chatbots” that substantially improve the online shopping process. This NLP tech will keep improving until, eventually, AI-powered chatbots will be better at helping you find the product you want than an in-store sales rep.
This is the power of technology and innovation at work. It compounds, year after year, and only gets better, and better, and better…
So… is Nordstrom and the entire physical retail sector on the cusp of making a huge comeback?
The gap in the quality of the physical shopping experience, and the quality of the online shopping experience, will only widen… at an exponential rate… over the next several years, thanks to the compounding positive impact of technological progress. Eventually – and inevitably – most shopping will migrate online.
In other words, this big rally in physical retail stocks and concurrent lag in e-commerce stocks is super short-sighted.
It forgets the secular forces at work… secular technology forces that aren’t going away anytime soon and which are only strengthening…
Because, after all, great talent makes great products, and I can tell you from first-hand knowledge that today’s top graduates aren’t going to work for Nordstrom, Kohl’s, and Macy’s – but a lot of them are going to work for Shopify, Amazon, Etsy, and Wayfair, meaning those companies are only going to keep pushing forward on improving their services at a relentless pace… while Nordstrom, Kohl’s, and Macy’s get left in the dust.
At InvestorPlace, we call this widening gap the “technochasm.”
It doesn’t just apply to the retail world. It applies to every other sector of the economy, too.
Movie theaters? Yeah, they’re great. I personally love the Cookie Dough Bites that AMC sells. Delicious.
But improving semiconductor technology and falling costs will soon be at a point where 80-inch-plus, super-HD, theater-like TVs will be common in homes across America…
Data analytics and machine learning models will soon be good enough that Netflix will be able to hyper-personalize everything so that you only end-up watching movies and TV shows you love…
Augmented reality tech will improve to a point where Netflix and other streaming services develop interactive and immersive content…
And what talent is going to work at AMC these days? Companies like Netflix and Roku, meanwhile, are growing their highly adept engineering and data-science teams like wildfire.
Plus, I recently discovered amid the pandemic that Target sells Cookie Dough Bites (and now, we have a whole pantry full of them).
The writing is on the wall.
Are movie theaters going extinct? No. But the quality of the streaming TV viewing experience will only get exponentially better than the quality of the movie theater viewing experience, thanks to the compounding effects of technological progress – and eventually, most entertainment consumption will be done at home.
Lather, rinse, repeat for the shift from gas-powered cars to electric vehicles… from oil and gas to solar and wind… from traditional healthcare to DTC telemedicine… from physical advertising to programmatic digital advertising… from animal-based foods to plant-based foods… so on and so forth.
The compounding positive impacts of technological progress will only accelerate these shifts in the coming years.
So… are you still thinking about ditching the world-changing technology stocks that are backed by the most talented engineers and forward-thinking visionaries on the planet… and going all-in with dinosaurs that may catch a tailwind briefly here in 2021?
Technology taking over the world is an inevitability. And technology stocks – which are now grossly oversold and deeply undervalued – are due for an enormous, multi-year comeback.
Let’s make sure you don’t fall on the wrong side of history here…
There are a lot of growth stocks to like that will score long-term investors big returns …
But there’s one stock in particular that’s the best growth stock to buy today.
It’s a company that reminds me of a young Amazon. Indeed, I think buying this stock today could be like buying AMZN stock back in 1997 — before it soared thousands of percent.
Which stock am I talking about?
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.