Generally speaking, the technology industry is less impacted by government policies and landscapes than some other industries. Nevertheless, a high degree of uncertainty surrounds the policies of President-elect Donald Trump. Above all, technology companies have been major beneficiaries of global trade, and most large technology firms derive significant revenue from outside the U.S. While campaign rhetoric on trade, immigration, and possible China tariffs is a source of concern for several leading technology companies, the market has not yet received enough clarification on these specific issues to warrant a major shift in sentiment one way or the other.

Conversely, rumored tax reform could possibly counterbalance any negative impact resulting from shifts in trade and immigration policy. Overall, tax reform would be beneficial to the technology industry given the possibility of tax repatriation, which would release cash currently trapped offshore, raising the odds of large-scale mergers and acquisitions in the domestic market. To date, the vast majority of M&A activity within the industry has involved small- to mid-cap companies; however, repatriation opens the door for major players in technology to look more closely at acquiring larger companies.

In the face of an evolving macroeconomic landscape, we remain committed to our bottom-up approach to stock selection. We continue to believe that truly innovative companies can thrive even in the face of broader economic challenges. For example, we believe that many companies within the software industry are well positioned to achieve meaningful growth over the next several years as the growth in cloud computing continues unabated. New applications like autonomous driving, Internet-delivered video programming, and augmented reality will further bolster this trend, and we believe it stands as an area that offers long-term growth opportunities. We also continue to research new investment themes in order to uncover companies that offer long runways for growth. The consumer video game market, which has been transformed over the last decade, represents one such investment theme. Companies are now less reliant on creating hit video games and can instead rely on intellectual property (like in-game monetization), franchises, and a common developer platform to help with growth and margins.