The U.S. financial market soared during Tuesday's session with a record at the end of the day at 3,389.78 points. But this incredible recovery is due more to speculation than to the recovery of the US economy, still struggling because of the Covid-19 pandemic.
It is especially the speed with which the US stock market has rebounded that is of interest here. In just 6 months, the S&P500 index has managed to return to its historical level of February 19. It should be remembered that the coronavirus crisis had caused this index to lose 34%, with a low of 2,237 points in March. This one succeeded in recovering 52% on August 18.
Better yet! The performance recorded by this index for the second quarter is none other than the best performance recorded since 1998.
The situation in Europe is less positive for the stock markets, where only the DAX 30 is managing to almost regain its February levels, although it is hitting the 13,000 point mark. The other indices including the CAC 40, FTSE and FTSE MIB are still down 15 to 17% over the year with a exhaustion of the recovery momentum at the end of April.
The Spanish Ibex 35 index is at the end of the ranking and remains 26% below its level at the beginning of the year. It is close to the 7,000 points and thus far from the 10,000 points of February.
The difference between the prowess of the American market and the weakness of the European market is largely explained by the fact that the United States has more technological values than the European Union.
Indeed, the strong rebound of the S&P500 is undoubtedly to be attributed to the tech giants who benefited from the containment and social distancing measures that boosted the digital transformation. Companies such as Google, Amazon, Apple, Facebook and Microsoft have thus become safe havens for investors and have gained many points. Today, they represent nearly 25% of the American index.
However, according to analysts, this significant concentration of the US market on these technology stocks is both an advantage and a disadvantage. In fact, and according to the various surveys that have been carried out among investors, it has been the most consensual positioning on this market for several months now. This means that the market is more likely to turn around soon. Valuations that are between 25 and 26 times 2021 earnings leave no margin for error. Thus, many investors are currently questioning these valuations and wondering whether these valuations, which are currently at their highest level in 10 years, can be sustained in the future.