Although nearly 40M Americans have lost their jobs and small businesses are struggling to stay solvent, you might not realize that if you only watched the stock market.
Tech firms, in particular, are in a good place to take advantage of the shift as Americans conduct much more of their personal and professional lives online. “These indices are very tech-heavy and the tech sector is navigating this environment better than others,” said Mark Zandi, chief economist at Moody’s Analytics. “In some ways, they’re beneficiaries,” he said.
It can be hard to grasp just how big some of these tech giants are. We might assume that many of the brand names we see on a regular basis are the biggest companies out there, but name recognition has nothing to do with market capitalization. These huge market caps confer an outsized influence. “When trillion-dollar companies go up 5 percent, they’re literally going up $50 billion, which is bigger than a lot of companies are,” Neel said. “When you have moves and growth in really large companies, that winds up being much more important to the direction of the stock market.”
The flip side of lower borrowing costs is lower returns for bond holders — leaving them with no place to go but stocks if they need to hit a certain rate of return. ”Bond investors are now becoming stock investors,” Neel said, which drives share prices higher.
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