Tuesday, August 18, 2020

A boom or a slump?

The S&P 500, one of the widest and most prominent US market measures, has hit a new high despite ongoing worries about the sharp economic impact of the pandemic to close at 3,389.78 - about three points above its 19 February record.

The Nasdaq hit another record after surpassing its prior high in June while the Dow Jones Industrial Average is within about 5% of its February record.

US shares have been on an upward path since 23 March. Analysts say the recovery is partly due to America's central bank a slew of unprecedented economic support measures, Federal Reserve moves and other stimulus, as well as demand from investors who are confident the economy will heal and see few better opportunities to make money than on the stock markets.

Japan, which has seen its Nikkei 225 index climb back to roughly 4% of its pre-crisis high, has benefited from both aggressive government stimulus and relative success at controlling the virus without mass lockdowns.

But the gains in the US have outstripped many other markets. London's FTSE 100 remains about 20% lower than its January high, while France's CAC 40 is off about 19%.
The unusual strength of the US rebound comes from its tech companies, such as Apple, Microsoft and Amazon, which have been seen as winners despite lockdowns, along with companies in areas like cloud computing and machine learning.
"We would not be flirting with all-time highs were it not for technology," said Terry Sandven, chief equity strategist at US Bank Wealth Management.
Shares in the S&P 500's tech sector have climbed roughly 25% so far this year, even as other areas remain flat or negative. 
Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said that's a warning sign for those who might want to see the new S&P 500 high as a signal about the broader economy.
"There's big dispersion between those that have done well and those that have done poorly," he said.  Of the 500 companies in the index, more than half have shares trading lower than they were start of the year, he said.

No comments: