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Stock market rally: the tech giants conquer the floor

2020-08-30T10:55:27.082Z


The big tech companies depend on other companies in the corona crisis. Cartel watchdogs fear that the market power of Amazon, Apple and Facebook will continue to grow. But that's exactly what investors are betting on.


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Amazon logo on screen: strengthened in the corona crisis

Photo: Bloomberg / Bloomberg via Getty Images

Two weeks, two records: first, the electronics company Apple cracked the two trillion dollar mark in market capitalization on the stock exchange. A few days later, Amazon founder Jeff Bezos made it over the threshold of $ 200 billion in net worth. The richest man in the world has gotten a little richer in the midst of the corona crisis: In the Bloomberg billionaire index, nothing comes after him for a long time. 

Both records are driven by the same phenomenon: the stock market rally of the past few months has multiplied the prices and thus the wealth of the shareholders. It took just 126 trading days for the US stock index S&P 500 to return to its previous high after the crash in March. In August, the index of the 500 largest listed US companies reached a new all-time high. "As if the pandemic had never happened," comments investment expert Jack Ablin from Cresset Capital. 

On closer inspection, the price gains turn out to be driven by a small group that has left the rest of the field far behind: Without the top performance of FAANMG - Facebook, Apple, Amazon, Netflix, Microsoft, Google (Alphabet) - the S&P 500 would have its too Stage record not made last Wednesday. The tech sector put the index at an all-time high, while other sub-sectors such as health and energy closed in the red. 

Tech giants are making up for price losses by other companies

According to an analysis by the broadcaster CNBC, 60 percent of the companies represented in the S&P 500 have not made up for the corona-related exchange rate losses just under six months later. But because the tech giants now make up a quarter of the index's total value, that hardly matters in the balance. 

  • Apple stock is up 70 percent this year to $ 500. It had taken the company 42 years to hit the first trillion in market capitalization. In this round, it only took 21 weeks to collect $ 1,000 billion. Because the $ 500 share has become unaffordable for retail investors, Apple is now doing a split, turning one share into four.  

  • In 2020, Amazon has gained 80 percent on the stock exchange, Microsoft and Facebook over 40 percent, Alphabet over 20 percent. 

  • The tech stock market barometer Nasdaq 100 has so far recorded a plus of over 30 percent in 2020. That is almost the same as in 2019, when America's economy experienced its eleventh consecutive year of recovery. 

  • The industrial tradition index Dow Jones, however, is not making any headway. The oil company Exxon Mobil - once the most valuable company in the world - is thrown out of the index. The cloud provider Salesforce is moving in for this. "Old economy stocks are being replaced by new economy stocks", stated Invesco expert Kristina Hopper. 

While the well-off part of the population survived the economic crash fairly unscathed, the socially disadvantaged suffer disproportionately from the consequences. While small and micro-entrepreneurs struggle for credit and survival, many corporations are reporting high demand for their bonds and sales growth.

"The reality is that the strong get stronger"

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The "FAANMG" have mastered the "Category 5 storm" of the Covid 19 pandemic well, the industry analyst Daniel Ives of Wedbush Securities recently said. "The reality is that the strong get stronger." Apple increased sales in the second quarter by eleven percent to nearly $ 60 billion. Amazon has tripled its grocery sales and posted earnings of over five billion dollars for the quarter. 

Nonetheless, some observers are starting to get scary about the stock market rally. Because many of the tech stocks are highly valued in terms of fundamentals - investors are betting on the future. While the cartel watchdogs are watching the tech giants' growing market power with concern, the stock buyers are hoping exactly that: Amazon & Co. have further strengthened their competitive position in this crisis. 

However, Cresset co-founder Ablin warns against confusing "Wall Street with Main Street", that is, stock exchanges with the real economy. The market capitalization of FAANMG now corresponds to more than a third of the total economic output of the USA. "But together these companies employ less than one percent of the workforce."

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Source: spiegel

All business articles on 2020-08-30

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