During testimony before the U.S. Senate Committee on Science, Commerce and Transportation, Federal Communications Commission chairman Tom Wheeler argued that the Commission’s net neutrality rules would have a positive impact on investment, citing an uptick in the market the day after the Commission issued its broadband reclassification order. Mr. Wheeler is correct that the market enjoyed a sweet ride upwards on February 27. CNN reported that the Nasdaq increased 7% while the Dow rose 5.6%. The S&P 500 gained 5.5%.
But were these returns the result of the Commission’s decision to take us back to 1995? No, they were not. The jump in stock market values were likely due to signals from central bankers around the globe, including insights shared by Federal Reserve Board of Governors chairman Janet Yellen. Dr. Yellen opined before Congress that the economic outlook for the United States in 2015 was good. Also adding to the positive outlook on that day were actions taken on the part of a number of European central banks. For example, the European Union approved another stimulus package for the Euro Zone with particular emphasis on Greece’s struggling economy. That type of positive news out of Europe could only signal to investors that an important market for American business was thawing.
If we go back to the day of the Commission’s issue of its rules, February 26th, the news was gloomier for the markets overall. According to Zacks.com the market took a downturn, with the Dow Jones Industrial Average falling .1% and the S&P 500 falling .2%. The Nasdaq, which weighs heavily toward tech stocks, did see an increase of .4%. This increase was led, however, by Google, Adobe Systems, and Facebook. Ironically, Google and Facebook have been proponents to some degree of net neutrality so maybe Mr. Wheeler was doing the happy dance for these guys.
Overall the past four weeks have not been good for the media and telecommunications. Over the last four weeks, the New York Times Technology Media and Telecommunications index has been down .62%. For the past 52 weeks, a time period that for the very most part did not include any net neutrality rules, the New York Times TMT increased 9.37%. With that type of growth the industry didn’t need any rules to spur innovation.
Bottomline, Mr. Wheeler hasn’t shown me any evidence that his latest version of net neutrality rules is having any positive impact on the markets.