The market mover of the week was painless for stock markets in high spirits, which these days need nothing to get nervous and dance in volatility. In November, inflation in the US jumped to 6.8% (compared to 6.2% per year recorded in October). A bad figure if taken in itself (the highest since 1982) but well received by the US indices, especially by the technological Nasdaq which closed with an increase of more than half a percentage point and which “just” 1% is missing to review its all-time high closing at 16,591 points on November 19th.
For investors, inflation is at an end
Why was the surge in consumer prices accompanied by risk appetite on Wall Street? Because the figure was indeed up but in line with expectations. The market had already positioned itself in previous sessions on a further increase and was therefore not caught off guard. The other good news (long investors side on US equities) comes from the feeling that this 6.8% could represent the peak. In fact, if we consider that it was largely determined by the increase in energy costs (+ 33%) and that in recent weeks both the price of oil (-20% from the highs of mid-October) and that of natural gas (- 48%) have dropped to say the least, so it seems reasonable to expect the December figure to be lower.
The rotation towards T-Bonds
Investors who thrive on expectations and like to move forward reacted accordingly by buying back US government bonds resulting in lower yields. The two-year rates fell from 0.73% to 0.65%, those at 10 from 1.52% to 1.47%. The ball now passes to Fed Governor Jerome Powell who on December 15 will have to decide whether to expand the scope of tapering (the reduction of stimuli) from 15 to 30 billion per month or to buy time.
The restart of the tech titles
In any case, the drop in rates has given oxygen to tech stocks, the most negatively exposed to a possible restart of the cost of money because they have a business model fueled by debt and an unbalanced market valuation on future cash flows. Valuation that tends to suffer if it has to be recalculated with higher debt rates. However, it must be pointed out that today we are talking about NASDAQ 100 it means telling the story of 5-6 companies more than anything else. The performance of this index – which brings together 100 companies on paper – is determined for 55.8% by the performance of Apple (which alone has a weight of 14.9% strong of the record capitalization of the last few hours close to 2,900 billion dollars), Microsoft (13%), Alphabet (9,5%) Amazon (9,2%), Tesla (5,2%) e Meta (4.6%), the new version of Facebook.
The weight of “big tech”
So behind the Nasdaq’s rise of 27% since the beginning of the year, there are above all + 50% of Microsoft and Tesla and + 30% of Apple. In proportion, Peloton’s -72%, Zoom’s -44% or Paypal’s -18% (stocks from the lockdown economy that suffered in the year of vaccines) weigh much less. In fact, passing from the “normal” index, that is calculated on the basis of the different capitalisations of the companies, to the “equal weight” one – where the 100 companies have the same weight in the calculation of the index – the 2021 performance is almost halved to + 15 percent. Of the 100 Nasdaq companies since the beginning of the year, 35 are in the red while another 10 have recorded single-digit gains, well below the benchmark. So not all companies – while belonging to the growth category, the one favorably exposed to the current low interest rate regime – are taking part in the party. Also yesterday, on a positive day for the index, 47 companies closed in the red.
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