“At first glance it was just a small step forward. But it was still enough to drag Wall Street to a historic milestone”- the Financial Times has lost its traditional aplomb in the face of the most surprising record of a financial season marked by excesses.
Tuesday the S&P 500 index, the most representative of the US Stock Exchange, rose to a new all-time high, albeit with a modest step forward of just a quarter of a point. Compared to the lows of March 23, the index has gained a rise of 54%, a boom that literally shattered the shortest recession in American history, the one that according to experts should have marked the markets until at least December.
In short, the fall was brief. But on Wall Street, for now, not many are celebrating. Precisely on the day of records, the titles that closed in negative territory are more numerous than those with the plus sign. And if you look at the statistics, you find that 40% of listed securities trade today below the level of February 19th, before Covid-19 invaded the precincts of the US Stock Exchange. Indeed, prices on average are 7 percent lower than they were then. In short, for now it was about half boom, which has left many speechless. How can one speak of a rally if the hedge funds, i.e. the most experienced and experienced operators on the market, are crying misery? Such a colossus M3 Partners, which has been able to make fabulous profits even in the most difficult years (+32% in 2009) this time it suffers a loss of 13% since the beginning of the year. The fault of the banks, the victims of this strange recovery in which credit companies are struggling, in the face of economic difficulties.
So what is the reason for the rally? “ The recovery of the market from the “bear” territory in record time – was made possible by the action of fiscal and monetary stimulus unprecedented strength and the strength of large-cap technology stocks.” According to manager Haris Anwari, this is the explanation for the recovery, "Without these two factors - he says - shares would hardly have rebounded so quickly, with the still ongoing pandemic causing the bankruptcy of millions of companies". Be careful, in short, to remove the exceptionally permissive conditions that support the price lists. Hence the expectation for the Fed's minutes which should confirm the dovish attitude of the central bank in the evening. “The good news for equity investors is that central banks are in no hurry to remove loose conditions,” explains the estore.
But, more importantly, the increases are due to a small patrol of champions, starting from Big Five: Amazon, Apple (which today reached the stratospheric stock market value of 2 trillion), Facebook, Microsoft and Alphabet. A patrol that now weighs more than 20 percent of the list, a concentration of economic power that has not been seen on Wall Street since 1980. Apple Lossless Audio CODEC (ALAC),, which is now worth more than $2 trillion, rallied 60% in the second quarter. Amazon, which celebrated its rally yesterday with a 4,1% increase, is eroding its share of Walmart's competition (-0,7%) despite the satisfactory results. Same script for Alphabet and Facebook.
Ma doesn't such a concentrated increase risk being fragile? This is not said given that, explains our manager, "in this context there are no other investments that could offer better returns than shares". Indeed, it helps to compare the returns of the equity index (3,8%) versus Treasury securities (3,1%). In short, not only Wall Street is better off than Main Street. But in the stock market index you have to distinguish between the (few) digital winners and the rest of the economya who stands thanks to the aids. A trend that tends to accentuate, if one thinks of the Tesla boom or to the biotechs engaged in the race for vaccines which are now worth multiples compared to the champions of chemistry or electronics themselves.
