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Nasdaq is skyrocketing. That may not be a good sign for the economy



That was the message from Wall Street as tech stocks soared despite the fact that no winners were declared in the US presidential election.
The Nasdaq spiked 4% on Wednesday, making the index home Amazon (AMZN), Alphabet, Facebook and Microsoft (MSFT) on track for best day since early April.
Nasdaq almost doubled the Dow, including more economically sensitive companies like Caterpillar (CAT) and Home Depot (HD). Russell 2000, which was most exposed to the power of the US economy, is barely doing any good.

In a way, it̵

7;s a reenactment of how tech stocks exploded during the early stages of a post-pandemic recovery in May, June, and July. Investor sentiment that these companies will thrive even if no major stimulus from Congress is split and the economic recovery remains fragile.

“People will go back to the operating play if the economy slows down,” said Keith Lerner, head of market strategy at Truist / SunTrust Advisory. “When people are defensive about the economy, they buy technology.”

Stick with the pandemic winners like the net loom

Nasdaq futures surged overnight as the result of a drop in the election was supposed to be halted.
Amazon, the owner of Google Alphabet (GOOGL) and Facebook (FB) All pandemic winners – are up 5% or more in midday trading. In contrast, companies need a strong economy to perform well, for example Ford (F), Wells Fargo (WFC) and Boeing (father) is trading unstable or losing points.

Scott Yonker, an associate professor of finance at Cornell University, wrote in a report Wednesday: “Like animals, investors stand danger or uncertainty by following the strongest of the pack. . “For the investors, this means pouring money into the recent ‘winners’.”

Wall Street has the election night it's most afraid of

The bottom line is that while the race to the White House is still going, investors have lost confidence in a green wave.

The Democrats’ chances of gaining control over the US Senate have been reduced on the basis of the prediction P prediction. It currently costs around 89 cents to win $ 1 if the Republicans win the Senate, compared with just 46 cents a day before the election.

That is an important change, because markets had previously expected Democrats to wipe out, paving the way for strong fiscal stimulus that would help non-tech companies.

Christopher Smart, global chief strategist at the Barings Institute of Investments, wrote in a report Wednesday: “The only sure conclusion is that the ‘Green Wave’ is in decline before it gets to shore and the outlook for the package. Economic stimulus has yet to decline.

What happens to fiscal stimulus now?

If Democrats control both the White House and the Senate, economists expect faster economic growth and a bold fiscal stimulus package worth at least $ 2 trillion.

That scenario led investors to buy economically sensitive stocks in the weeks leading up to the election.

“People are moving to cheap areas, beaten to wait for stimulation,” said Truist’s Lerner. “Now, the market is concerned about the size of the financial package.”

Jamie Dimon: Respect the democratic process - and the electoral outcome

Fiscal stimulus is still to be expected if the government is divided, but it may not be as large as it is under the green wave.

Technology stocks can also benefit from the stalemate as it reduces the chance of widespread suppression by Congress. Although antitrust investigations may continue, Republicans and Democrats are unlikely to agree on the new law.

Mike Loewengart, managing director of investment strategy at E * Trade, writes: “The growing likelihood of Congress being divided,” lowers hopes of increased regulation for the sector. “

Wednesday’s rise in technology shares was in stark contrast to how the sector operated in 2000, when investors grappled with a controversial election. But back then, investors lost faith in technology stocks as the dotcom bubble burst.

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