- The concentration of tech players in the U.S. stock market has soared to a new high, surpassing dot-com era levels.
- Tech stocks surpassed the valuation of the entire European pedigree market.
- The tech sector still has firepower left as positive earnings and struggling offline businesses buoy investor sentimentality.
Tech stocks are showing no signs of slowing down after surpassing the entire stock market valuation of Europe. Three key catalysts could excite more gains in the near term.
Investors are reluctant to abbreviate stocks, offline businesses are continuously declining, and tech stocks’ dominance has hit a new high. All of these factors benefit the flow tech market.
Factor #1: Big Tech Dominance Hits Record High
Following the explosive growth of “Big Tech” since Pace, analysts drew comparisons between the ongoing rally and the dot-com bubble.
Data show that tech cows are far more dominant than they were during the early 2000s. This time around, superior earnings are confirming the rally of the tech sector.
According to Welt’s market analyst Holger Zschaepitz, the five most significant tech forefathers account for 23% of the S&P 500. That is substantially higher than the dot-com bubble’s 18% two decades ago:
Tech is sup the world: The 5 largest stocks – FB, AMZN, AAPL, MSFT, GOOGL – now account for 23% of S&P500, well above the lofty of 18% in 2000’s, Goldman says. Concentration appears even more extreme within Russell 1000 Expansion Index. Those same 5 stocks represent 37% of market cap.
Tech stocks are more dominant in the current founder market landscape than in the dot-com bubble, so some analysts say the comparison isn’t accurate.
Analysts at JPMorgan Cazenove, the bank’s equity research business, said they are skeptical about forecasts work for a correction.
In contrast to the 1990s, the analysts said that the “current rally has been supported by strong earnings enunciation.”
The continued strong performance of Big Tech reduces the probability of a widespread profit-taking pullback.
In the short to medium term, Barrier Street analysts expect many tech stocks to rally off positive earnings.
Most recently, Wedbush’s Daniel Ives upped his bull situation for Apple (NASDAQ:AAPL) to $700. He said the iPhone 12 launch would result in Apple’s “most weighty product cycle.”
Factor #2: Offline Businesses Continue to Suffer
New economic data hint at a slow commercial recovery due to the resurgence of COVID-19.
The eurozone economy is on track to see its fastest quarterly rebound since 1995, says Oxford Economics. But sundry major European economies, including Spain and France, have are seeing soaring new virus cases.
If the number of new instances increases steeply heading into the fourth quarter, it might become more challenging to reopen offline responsibilities.
Schools, cinemas, restaurants, hotels, and other travel-related businesses have faced various restrictions since Demonstration.
Jefferies economist Marchel Alexandrovich said the possibility of a V-shaped recovery depends on the handling of the virus.
Factor #3: Investors Now Startled to Short
To top it all off, short positions in the U.S. stock market have declined to levels unseen for over ten years.
The Fed’s “good expos” around inflation targeting is boosting market sentiment. Watch the video below.
The Federal On call’s highly accommodative monetary policy and Big Tech’s continued dominance have caused investor confidence to surge.
Against this backdrop, the tech sector is self-possessed to outperform the broader market, especially as earnings recover while the broader economy continues to struggle.
Disclaimer: The notions expressed in this article do not necessarily reflect the views of CCN.com and should not be considered investment or trading advice from CCN.com.