![]() ![]() “Much of the market can be characterized as being in bubble territory,” said Vitali Kalesnik and Ari Polychronopoulos, analysts at money manager Research Affiliates, in a report this month. It means just a handful of stocks can sway the broader market, and all the passive index funds that many investors own. That’s bad news when you consider these five tech companies are collectively worth nearly $6 trillion – about 25% of the S&P 500’s overall value. Millennials working from home may be moving the market So tech companies – and hence their earnings and valuations – could be under pressure after the election, regardless of whether Donald Trump wins a second term or presumptive Democrat candidate Joe Biden is elected president. In fact, wariness of Big Tech might be one of the few areas of bipartisan agreement. Some might argue that they are too dominant, which raises the specter of further antitrust crackdowns from Washington. (FB) – are now all extremely profitable market leaders. The largest tech companies – Apple, Microsoft There are some notable differences between now and 20 years ago, of course. “However, if the real economy does not improve alongside it, this could widen the gap between financial markets and the real economy even further, prompting an asset price crash.” “The Fed has committed to continuing its effort to prop up corporate debt markets,” she added. “The risk of an asset bubble bursting has risen significantly,” said Cailin Birch, global economist at The Economist Intelligence Unit, in a report Thursday. ![]() And there are concerns that these programs help Wall Street but have no positive spillover for Main Street. Investors may have become too complacent, expecting the Fed and Congress to keep coming to the rescue with ever more stimulus. “This is leading to the creation of a big bubble in asset prices and the further it grows, the more damage it will make when it bursts,” Sayed added. “Investors are bidding up some of the worst performing companies just because they believe the current policies will keep them afloat,” said Hussein Sayed, chief market strategist at FXTM, in a report Thursday. That might be the most egregious example of 2020 irrational exuberance. (HTZ) have also rallied after filing for Chapter 11 protection. Making matters worse, bankrupt companies like Hertz (SPCE) and DraftKings are inexplicably surging.ĭash for trash…Chapter 11 stocks are soaring īut the rapid rebound from what some have dubbed the Great Lockdown is raising some eyebrows with grizzled market veterans, especially since so many IPOs and other money-losing new listings like Virgin Galactic Stocks have recovered following the Covid-19 outbreak thanks to numerous stimulus initiatives from the Fed and Congress aimed at helping consumers and businesses kicking in and the gradual reopening of the economy. The Nasdaq plunged more than 32% between February 19 and March 23 before bottoming. Techs took a big tumble in March with the rest of the market. Zoom is now worth more than nearly 85% of the S&P 500 stocks ![]()
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