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Two weeks, two records: First, electronics company Apple passed the $ 2 trillion mark in market capitalization on the stock market. A few days later, Amazon founder Jeff Bezos surpassed the $ 200 billion threshold in net worth. The richest man in the world has gotten a little richer in the midst of the crown crisis – on the Bloomberg Billionaires Index, nothing haunts him for long.
Both records are driven by the same phenomenon: the stock market rally of recent months has multiplied prices and, therefore, shareholder wealth. It only took 126 business days for the US S&P 500 stock index to return to its previous high after the March crash. In August, the index of the 500 largest publicly traded US companies reached a new all-time high. “As if the pandemic never happened,” says investment expert Jack Ablin of 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 superior performance of FAANMG – Facebook, Apple, Amazon, Netflix, Microsoft, Google (Alphabet) – the The S&P 500 would also have its No stage record set last Wednesday. The technology sector placed the index at an all-time high, while other subsectors such as health and energy closed in the red.
Tech giants are making up for other companies’ price losses
According to an analysis by broadcaster CNBC, 60 percent of the companies represented on the S&P 500 have not made up for currency losses related to the crown just under six months later. But because the tech giants now account for a quarter of the index’s total value, that hardly matters on the balance sheet.
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Shares of Apple are up 70 percent this year to $ 500. It took 42 years for the company to reach its first trillion market capitalization. In this round, it only took 21 weeks to collect $ 1 billion. Because the $ 500 share has become unaffordable for retail investors, Apple is now splitting, turning one share into four.
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In 2020, Amazon earned 80 percent on the stock market, Microsoft and Facebook more than 40 percent, Alphabet more than 20 percent.
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The Nasdaq 100 Stock Market Barometer has so far posted a plus of more than 30 percent in 2020. That’s about the same as in 2019, when the US economy experienced its 11th consecutive year of recovery.
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The Dow Jones Industrial Heritage Index, however, did not advance. The oil company Exxon Mobil, once the most valuable company in the world, is removed from the index. Cloud provider Salesforce is moving for this. “Stocks from the old economy are being replaced by stocks from the new economy,” said Invesco expert Kristina Hopper.
While the well-off part of the population survived the economic crisis 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 “FAANMGs” have weathered the “Category 5 storm” of the Covid 19 pandemic well, industry analyst Daniel Ives of Wedbush Securities said recently. “The reality is that the strong get stronger.” Apple increased sales in the second quarter by eleven percent to nearly $ 60 billion. Amazon tripled its grocery sales and posted a profit of more than $ 5 billion for the quarter.
Still, some observers are beginning to panic about the stock market rally. Because many of the tech stocks are highly valued in terms of fundamentals, investors are betting on the future. As the cartel’s watchdogs watch the growing market power of the tech giants with concern, share buyers are expecting exactly that: Amazon & Co. have further strengthened their competitive position in this crisis.
However, Cresset co-founder Ablin cautions against confusing “Wall Street with Main Street” – that is, the stock exchanges with the real economy. It is true that FAANMG’s market capitalization now corresponds to more than a third of total US economic output. “But together, these companies employ less than one percent of the workforce.”
