Market View (Summer 2019) – Ethics and Big Tech: What Are the Limits?

by Daniel Yu, CFA®, AIF®, REDW Wealth

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In our last newsletter, we discussed the importance of ethics as a safeguard of the trust necessary to a free market economy. Recently, the role the largest technology companies play in our society has come under scrutiny, and we are beginning to assess the responsibilities they have to our society.

Undoubtedly, the benefits of technology are wide and varied. Technology has dramatically increased our ability to access information. Videos, websites, podcasts, and blogs have made learning and development exceptionally easy. Communication has become vastly faster and more varied than even 20 years ago. Friends and families may be spread around the globe, but are able to communicate within seconds. Electronic maps guide us to wherever we want to go, and shopping websites enable us to purchase just about anything, often with free shipping.

However, we are now discussing what limits and regulations should be in place for the benefit of society. How long can our digital actions be recorded? Who really controls the information generated from our online interactions? How much responsibility do social media companies have to regulate what is posted on their sites? Are these companies enabling or stifling free speech?

These discussions and debates are necessary, and it is likely that new rules and regulations with their associated cost of compliance will be implemented at some point in the future. Europe has already adopted a wide range of regulations for technology companies, and we expect those regulations will inform how things develop here in the U.S. However, as Andrew Fastow noted in our last newsletter, rules and regulations tend to leave large gray areas where rationalization often occurs. Above the rules, we will need to develop a set of ethics regarding the digital age. Ultimately, it is our own personal ethics and commitment to a civil society that enable us to utilize technology for our good. While technology has broadened the ability of many to speak, it is our ethics that determine if our words are helpful and constructive.

Quarter in Review

The second quarter of 2019 experienced ups and downs, as equity markets had a positive April on decent earnings reports, followed by a downturn in May as some economic news weakened and concerns over trade with China intensified, and a recovery in June on expectations of the Federal Reserve cutting interest rates this year. To put things in perspective, after the 2008 recession, economic growth in the U.S. slowed to an average 2% per year until 2017 and 2018, when growth began to accelerate to 3%, which is the historical average.

Expectations are that GDP growth will decline in 2019 to somewhere between 2 – 3% (depending on the economist), but we are still not anticipating a recession. In terms of trade with China, we should expect negotiations to be long and drawn out as the two largest economies in the world work on a whole array of issues. However, we are already seeing signs of production moving away from China to other nations, which might provide an opportunity for smaller nations to accelerate their own domestic growth. Finally, fixed income and REITs provided needed balance to the volatility of equity markets, again demonstrating the importance of a diversified portfolio.


Copyright 2019 REDW Wealth, LLC. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.