Tough Markets Breed Innovation

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In today’s Money Morning…a timely gale…the new way to pay…a quiet revolution…and much more…

After two very rocky days of market gyrations, it seems volatility is heating up again.

Inflation is, of course, the big driver of this — be it in Australia or the US.

Investors are clearly worried that the Fed and RBA are going to have to play catch-up with rates — a signal that could suggest things may get worse before they get better…

For the more speculative- and high-growth-focused stocks and assets, this is, of course, a worry.

As I discussed last week, the US’s biggest tech stocks are being scrutinised more than ever. It will depend on the individual business and its management as to whether they sink or swim. And that’s a theme that is seemingly continuing.

Google stock (Alphabet), for instance, has taken a big hit over the past week — resulting from a culmination of weaker expectations and results from their latest quarterly earnings.

In contrast, Microsoft managed to buck its own downward trend after a stronger performance. It’s another example of the disparity emerging between tech stocks that could underpin a broader market shift.

What is far more exciting from my perspective is what this churn may lead to. Because despite the pain across a lot of equities, I suspect we’re going to see a whole lot more experimentation and innovation…

A timely gale

I think it’s hard to dispute the fact that the global economy is reaching its next major juncture.

We’re now firmly amid our post-pandemic revaluation — a phase that is seeing investors split between long-term optimism and short-term pessimism.

But that’s hardly a new phenomenon.

The concept of ‘creative destruction’ or ‘Schumpeter’s gale’ is what’s at play here, in my view — an economic theorem that espouses the need to destroy the old in order to make way for the new.

I won’t bore you with the details but give it a Google if you want to learn more yourself.

Anyway, my point is, I truly do think we’re going to see something of a reordering for markets. More specifically, I expect tech stocks and industries in particular to get a bit of shake-up. Facebook’s switch to Meta, for example, is a recent display of the sort of change I’m talking about.

In a similar vein, another big name in the tech space recently made a pretty significant change. It just didn’t receive nearly as much coverage as Zuckerberg’s bold plans.

I certainly wouldn’t be surprised if it kicks off a much bigger trend, though…

The new way to pay

Earlier this month, e-commerce behemoth Shopify partnered with Strike in order to facilitate crypto payments.

If you’re not familiar with Shopify, it’s a platform that hosts more than 1.75 million merchants — helping millions of mainly small- and medium-sized businesses reach a wider audience online. As a result, US$175.4 billion was transacted across their network and the businesses using it last year.

Needless to say, they’re a very big player in the e-commerce industry. And now, thanks to this partnership, they’re going to allow businesses to accept cryptocurrency for their wares.

This is a huge breakthrough for crypto adoption, as PYMNTS reported earlier this month:

Strike Founder and CEO Jack Mallers noted that the Strike-Shopify integration will also include offline merchants, including Walmart, McDonald’s and many others across the U.S. He took a shot at traditional financial institutions for their seeming unwillingness to meet the changing needs of consumers in an increasingly digital world.

“There’s not been since 1949 a superior payments network that allows us to innovate, build on financial inclusion, offer cheaper services faster services,” he said at the Bitcoin Conference where he made the announcement, according to a Coingape report. “My grandfather used the same technology as I do. That’s not American; that’s bullshit.”

While Mallers may be bluntly talking up the agreement, Shopify hasn’t really been making all that much fuss about it. In fact, that’s why I’m only telling you about it today, because I only recently heard about this myself.

This is a big story, yet it isn’t being paraded around like one. It appears, however, that this is all a part of Shopify’s plan.

A quiet revolution

It should come as no surprise that we’re pretty vocal proponents of cryptocurrency here at Money Morning. The long-term potential for blockchain-based systems really excites us, well beyond its use as a speculative asset to invest in.

We also know a lot of people don’t share in our optimism.

For the large majority of people, crypto is still a taboo topic. Tech companies, in particular, have struggled to find ways to embrace this new technology without upsetting their existing customer base. It’s a conundrum that Shopify may actively be trying to avoid by downplaying this new development.

As the Financial Post remarked on the matter:

They [Shopify] may have particular reason for concern given that, for some reason, crypto is especially polarizing in tech. Whether it’s Tesla Inc., Ubisoft Entertainment SA or the privately held Discord and Kickstarter, their separate crypto embraces ended up so unpopular, most of them backtracked.

Shopify, perhaps, wants to have its cake and eat it, too. It sees the potential in crypto, but it is quietly betting on a less polarizing future, when, perhaps, like SMTP protocols in our email, we use such technology every day without realizing it.

This conclusion — a quiet revolution, so to speak — is exactly what we expect to happen.

Cryptocurrency is the kind of technology that needs this kind of seamless transition into the mainstream. It needs layered developments that allow your everyday user to buy, sell, and transact without ever needing to know how it works.

Only once we reach that point will we likely see true mass adoption of crypto.

That’s why it is so crucial a company like Shopify is trying to integrate into their operations. Because only with these sorts of bold embraces of new technology will we truly see innovation. And it is precisely from this innovation that we will likely see a new phase of growth and growth stocks.

So while everyone else is caught up in the day-to-day swings of the market, don’t lose sight of the big picture. We’re amid a turning point for tech and crypto is just one aspect that could help bring about a new era of excitement for investors.


Ryan Clarkson-Ledward Signature

Ryan Clarkson-Ledward,
Editor, Money Morning

Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.

About Ryan Clarkson-Ledward

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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