The S&P/ASX 200 Index (ASX: XJO) is slipping today, down 0.1% in early afternoon trade.
This comes after the index of the top 200 listed shares hit more than 6-month highs yesterday.
We're told the impetus for today's modest retreat is renewed doubts over the next round of United States government stimulus measures. These doubts saw the S&P 500 Index (SP: .INX) fall 0.6%. Though, mind you, that's only 1.9% below its all-time highs.
We'll spare you the details of the latest political gridlock in Washington DC. They're really no different from last week. Or the week before.
What's also no different is that the US government will pass new stimulus measures, potentially worth several trillion dollars. The only question is the timing.
As long-term investors, that timing shouldn't concern us. If your investment horizon is at least three years, a few weeks or even months of political wrangling over the next spending package should be little more than a fading bump in the road.
Image source: Getty Images
Tech shares shining bright
Over in the US the tech-laden NASDAQ-100 (NASDAQ: NDX) proved largely immune to yesterday's selling, closing flat (down 0.04%). That's just 2.7% below the index's 2 September record highs.
We see the same playing out here in Australia.
The S&P/ASX All Technology Index (ASX: XTX) – which tracks 50 of Australia's leading and emerging technology shares – hit a fresh all-time high yesterday. And it's up another 1.3% today.
The All Tech Index is enjoying a helpful boost from the likes of Afterpay Ltd (ASX: APT). The buy now, pay later (BNPL) giant has shrugged off doubts about would-be competitors and its valuation to once again be trading at its own record high share price.
So too cloud-based accounting software company Xero Limited (ASX: XRO). Gaining in intraday trading today, the Xero share price is up nearly 18% in October alone.
Budget offers fresh tailwinds
With many ASX tech shares at or near record highs, many investors fear they may have missed the boat. But there are a lot of reasons to believe the well managed companies in this sector, and indeed across most sectors in the ASX, can see their share prices run far higher.
According to Fidelity International cross-asset specialist Anthony Doyle, today's ultra-low interest rate environment gives investors little choice but to turn to shares, which provide potential share price gains along with dividend payments.
Doyle says (quoted by the Australian Financial Review):
We haven't breached that 7000 level which we saw earlier in the year but in relation to 1987, and 2009 certainly, the bounce back surpasses both of those episodes and one of the big reasons is the collapse in real yields…
We don't believe that the market has rallied too hard. We don't believe it has got ahead of itself. Indeed, particularly in the news last week coming from the budget, we're pretty optimistic on the outlook for Australian equities…
What central banks are doing by dropping interest rates as low as they are is removing the power of compound interest from cash and defensive assets. Investors are herded into riskier, riskier assets in order to attempt to generate the returns that they once enjoyed from defensive assets.
David Bassanese, the Chief Economist at exchange-traded fund (ETF) manager BetaShares, believes the Aussie tech sector is a winner from the new budget.
As the AFR reports, Bassanese cites the government's "new commitment to roll out ultra-fast broadband, push electronic invoicing within the public sector, streamline the business registration process and expand the digital identity system."
Bassanese adds, "This may well see a significant bring-forward of investment spending, boosting sales of computer and office equipment, along with cars and trucks."
We'll leave cars and trucks on the table today and stick with tech shares.
The ASX shares defending our virtual world
Australia and most of the developed world have embraced five years of technological innovation in a matter of months following the pandemic outbreak.
That means it's more important than ever we're able to keep our personal, business and government data secure from cyber thieves and prying eyes.
According to Richard Price, the Chief Executive of South Australian defence agency, Defence SA (quoted by the AFR):
Mitigating and managing the risk of cyber attack by criminals is an essential activity for everybody these days. For businesses in critical infrastructure and critical supply chains, of which defence is one obvious example, the threats are much more sophisticated, persistent and patient.
There are a number of ASX shares involved in the business of cyber security. One you might wish to consider adding to your own portfolio is Tesserent Ltd (ASX: TNT).
Tesserent provides cyber security and networking solutions to businesses and government institutions across Australia.
The Tesserent share price is up a phenomenal 525% year to date. Shares hit an all-time high on 14 August. The share price is sliding today and is down 14% since the record high, potentially offering investors a profitable entry point.
