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Nasdaq at bubble risk: analysis of the US market

Analytics

en.cryptonomist.ch 18 January 2022 15:41, UTC
  
Reading time: ~3 m

The US market in general is getting very interesting, with the Nasdaq to keep an eye on due to its risk of a bubble and the recovery of the real estate and luxury market. Since the end of 2021, significant risks and signals have come from the US, but also great opportunities. Let’s take a look at what they are.

Summary

Nasdaq and tech stocks

The entire US market has turned red since the beginning of the year. The Nasdaq was down -0.59 today after Wall Street was closed for the holiday yesterday. The Nasdaq, which is the index with the highest concentration of technology stocks, is in a situation where 40% of tech stocks have fallen by around 50% since their highs last year, with only the big tech companies, which are growing at an exorbitant rate compared with the rest of the sector, keeping them afloat. 

How long will a market that can grow but is only driven by the usual Apple, Microsoft, Disney, Tesla, Amazon, Facebook, etc. be sustainable? 

The big sisters in entertainment, research and technology are enjoying rosy futures, at least as far as their industrial plans are concerned. 

Apple is struggling with innovation and improving its product range. Microsoft, which has suffered a bit of a typical setback, has a clear path now that it is focusing on in-house design of its chips (in order to cut costs), which was the colossus’ real Achilles heel. Tesla is grappling with its CyberTruck and Gigafactory, as well as new agreements with the US government on the logistics sector of the military with a new ultrasonic land-based carrier and the Mars project, which includes a stable route to the red planet and terraforming projects, etc.

Bubble risk for the Nasdaq

According to Bloomberg, however, Nasdaq’s trend is not a healthy one, it is a very dangerous situation that not even the big tech companies with their trillions of dollars will be able to contain.

A situation that closely resembles what happened with the Dot Com bubble in March of the new millennium (2000).

The US is struggling with high inflation

The risk of inflation

To deal with inflation and calm the markets, the Fed has planned three rate changes for this year, but according to some analysts, things will be different. 

Wells Fargo, for example, but also Goldman Sachs, believe that the Fed has not calculated correctly and that at least four rate corrections will be needed between now and the end of the year, with the last correction coming just before the US mid-term elections in November.

In less than a month, the central banks will meet and the haze over this analysis will soon be lifted. The fight against inflation is only just beginning.

Banking and real estate

A brief mention should also be made of the banking sector which, thanks also to the excellent results of the lending trend, recorded +35% in the last year (Nasdaq Bank Index KBW), even outperforming the S&P 500. 

To close on a positive note, the luxury market, or more specifically the real estate market, is enjoying excellent health, both in terms of the boom in the metaverse and in real life, thanks to the broadening of the base of people who fall into the so-called “new wealthy middle class”, i.e. people with a turnover of €1.5 million or more, who are increasing their demand for homes from €500,000 to adapt to a new reality of smart working and short weeks. 


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