Market not as strong without the Fab 5 of tech
Nearly 60% of the companies in the index were in the red for 2020 through Thursday’s close, according to data from Refinitiv.
“Without Big Tech’s influence, the broad market would not look quite as stable as it does today,” analysts from Zacks Investment Research said in a report last week.
The over-reliance on this tech quintet could become a problem if Congress and the president (whether it’s Donald Trump in a second term or Joe Biden) decide to impose tougher regulations on or launch specific antitrust investigations against industry leaders sometime after the election.
“Though Congress is not likely to pass any meaningful legislation this year, there appears to be growing consensus that the current course for Big Tech is not sustainable. From an investment standpoint, the suggestion is that long-term outperformance may not be sustainable, either,” the Zacks analysts wrote.
International stocks have more momentum lately
The strong gains of the top techs also make it look like the US market is doing better than international stocks. But dig deeper and that too is untrue.
“The recent imbalances in the stock market can lead to vulnerability,” he added.
“The fact that the world’s most famous investor has committed to such large sums has ramifications for both domestic and international perceptions about Japanese equities,” said John Vail, chief global strategist at Nikko Asset Management, in a report.
Vail thinks the Berkshire endorsement “marks a true turning point” for Japanese stocks. He said that bears no longer have a good argument for their skepticism.
“No one will be able to speak quite as dourly, as the retort should typically be, ‘But Buffett Disagrees,'” Vail said.