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 has just hit a 9-month-high, mainly due to big names like Apple Alphabet Amazon. Meta and Nvidia have both doubled their share prices since the beginning 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 companies the new blue chips?
Not exactly. Nasdaq’s performance has been boosted by a few shares with the largest weightings. A similar story is in the S&P 500, which has also outperformed the Dow. Only 5 shares make up 80% the increase in the 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 in the game