Big Tech drives the stock market without much US help
The Fang shares generate a large part of their turnover in countries that can better cope with the pandemic and the reopening.
Bloomberg, July 13, 2020
Frustrated investors sometimes forget that Mr. Market is occasional irrational. A surprising rally of 42% while the nation is in a pandemic shows no signs of waning, has confused them; unemployment was at a level that has not been seen since the Great Depression, and GDP fell by up to 40%. Even worse, after a long ban, the country’s economic reopening appears to have been botched.
The average American is experiencing an economy that is very negative.
Still, and with a long line of suffering, the market doesn’t seem to be stopping. Yesterday the Nasdaq hit new all-time highs. The S & P 500 is not far behind. Both seem to ignore new record highs for coronavirus infections and countless stumbling blocks for reopening.
Try on Explanations These included the Federal Reserve’s liquidity injections, Congress incentive, upcoming Covid-19 treatment, and / or a vaccine. Maybe the markets are expecting another trillion impulses this summer; Perhaps investors look beyond 2020 to 2021 or beyond. Or a combination of all of these.
Another explanation is less clear: the main stocks of the S & P500 are huge technology companies that generate a large part of their earnings from outside the United States. Relatively, and for the first time in a decade, many wealthy industrialized countries around the world are doing better (and in some cases, much better) than the United States. Nations like Japan, South Korea and Germany have not only managed to subjugate the pandemic, their economies are far ahead of ours when it reopens.
For the past 5 years, the stock group known as “FAANMG” has had an overwhelming impact on the US markets. “Since early 2015, the S & P 500’s market cap has increased by $ 6 trillion. Of that, $ 4 trillion comes from the six big tech names: Microsoft, Apple, Amazon, Facebook, Alphabet (Google’s owner) and Netflix ” The times of London.1 Two thirds of the growth in the S & P500 was driven by only six US companies.
1. For the five-year period since 2015, the index rose by 56.5%. Since March 23approx Lows this year, the index has risen 42.1%, which is about three quarters of the gains of the past 5 years.
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