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Market Wrap-up for Feb. 12 - Cyber Security Remains in the Spotlight in 2015

Cyber security and hacking were among the biggest themes of 2014, as a number of large firms either had security breaches or made public efforts to step up their security in the cyber world. As expected, it remains a big theme in 2015, and while it most likely will not have a major impact on stocks over the long term, it is something that investors need to pay attention to.

Apple, Microsoft on Watch

Earlier this week, search engine giant Google issued something of an ultimatum to two of the biggest tech companies in the world (which just so happen to be two of its biggest rivals): Apple (AAPL ) and Microsoft (MSFT ). The statement alluded to the fact that Google’s team of hackers/programmers have found security flaws in both of the tech giants and that the companies have 90 days to patch them or Google will go public with the issues.

In Google’s eyes, its efforts are helping step up cyber security across the market, as it is playing the judge, jury, and executioner on that front. But companies like Apple and Microsoft likely see it a different way; Google has no official position to keep other sites secure and while it claims its intentions are for the greater good, it certainly looks strange that it only happened to call out two of its largest competitors.

Many feel that calling out these possible security problems will lead to bigger headaches for the general public as well as the companies involved. This school of thought suggests that these dealings should be kept behind closed doors so that individual hackers and groups do not get wind of a possible opportunity.

What It Means for Investors

As we have stated in the past, data and security breaches, while no laughing matter, tend to not have a major impact in the long term. Target (TGT ) took the largest hit from its breach in late 2013, which impacted earnings throughout last year. For the most part, however, the breaches that we have seen thus far have only caused short term volatility in the stock; Wall Street tends to suffer from short-term memory loss in such cases.

AAPL and MSFT will certainly be under the microscope over the next few months, as a possible breach in security being released to the public could send the stocks on a volatile ride, but as a long term investor, incidences like this tend not to impact the company over the long haul.

The Bottom Line

Short term volatility can come from any number of sources, but your goal is to not let it shake your strategy. Always keep your long-term objectives in mind and understand that stocks and markets go through volatile patches; it is a natural process of the investing world, and one you should learn to take advantage of.

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