More records in April for the Dow, S&P 500 and Nasdaq as the rally keeps going from the Trump election on November 8. Some investors believe it is the Trump factor, or Trumpflation, tax cuts and the like that is responsible for the solid rise.
The Dow is up 14.22%, the S&P 500 index has added 11.6% since November 8, and the Nasdaq Composite has climbed 16.5%, a rise whose size which explains the reason for the strong advance.
It is not the broad-based rise that many market reports suggest it is. It is in fact narrow and that exposes Wall Street to a major sell off should a handful of mega companies stumble.
Just as the big four banks drive much of the momentum on the ASX (helped by the big four miners, BHP, Rio, Fortescue and South 32), so a group of major tech stocks – five or six – are the drivers of Wall Street’s current surge.
Over the last two months, the vast majority of the benchmark US stock index — some 490 stocks — are essentially flat, according to US market research group, Fundstrat.
“About 250 stocks are outperforming the index YTD, which on the surface, implies the market is broad…” says Fundstrat late last week. “A lot of the heavy lifting is being done by a handful of stocks.”
Apple, Facebook, Amazon, Alphabet, Microsoft, Visa, Philip Morris, Home Depot, Comcast and Oracle have done the heavy lifting, rising 18.4% as a group in the first four months of 2017.
The group has a combined market value of $US3.4 trillion (twice the value of the ASX), and includes most of the so-called FANGs (Facebook, Amazon, Netflix and Google) that drove Wall Street higher in 2015.
The Nasdaq Composite last week breached the 6,000 level for the first time and notched up its sixth consecutive monthly gain on Friday — the longest winning streak since 2013.
Last week saw a ho-hum result for Microsoft, better figures for Alphabet (Google), Comcast (weak figures two weeks ago from Philip Morris), but a very bullish result from Amazon with far more information released and its 7th profitable quarter in a row.
This week though sees the big two report – Apple on Wednesday morning, Sydney time and Facebook the day after.
Analysts expect both to bring in a solid set of figures that won’t frighten investors.
Though, should it do then there could be a very rapid re-rating of the current boom.
