In recent months, investors have been flocking to safe-havens as they worry about the US debt ceiling. This time, there’s a twist: the safe-haven stocks of choice are large tech companies. The Nasdaq, which is dominated by tech stocks, just reached a new nine-month high. This was largely due to the big names such as Apple, Alphabet and Amazon. Meta and Nvidia are two large tech companies that have seen their stock prices double since the beginning of the year. What’s going on, and does this implicate forex in some way?
A unique situation
Blue-chip stocks tend to do better during times of uncertainty. This is why traditional analysts would expect the Dow Jones to outperform now. But, it’s actually doing the worst; it’s barely unchanged at +0.8% so far this year, while the Nasdaq is up >30%. Are tech stocks the new blue-chips?
Not exactly. Nasdaq’s outperformance is largely due to a small number of stocks with the highest weightings. A similar story is in the S&P 500, which has also outperformed the Dow. Just 5 shares account for 80% of the gains in the Dow Jones index. Most S&P 500 – the premier indicator for US business health – names are trading below the 200 SMA, an indication that they are trending downward.
Inequality is a game
The economic environment is changing.