The markets have not been performing the usual way they have been in the past few months. One could argue the erratic events that turned out this year were all negatively impacting the present market. The U.S. economic data were aggravated by the political strife. On the other hand there is an ongoing estimation regarding the timeframe the Fed will begin its tapering intervention to hinder the bubble like price action in specific assets. However, both issues have been economical by investors when U.S. courses pressed forward.
It just makes sense that the U.S. economic data having been severely affected by the U.S. capital was ignored. However, the larger concern of many companies were outperforming without much earnings, should be an attention-seeking indicator that there is a much bigger concern that needs to be addressed.
The most obvious case at this junction is the technology stocks in the U.S. as well as emerging markets, both maintaining a five-year high. Although the MSCI U.S. Technology index is inhibited from its all-time and has come off slightly having surpassed its record high two years ago by 13 %.
We indubitably live in a world where the biggest companies at present, Apple has an estimated $478 billion stock-market cap), Facebook ($117 billion stock-market cap) and Goldman Sachs ($76 billion stock-market cap) are all competing for the top spot in the market economy. Apple was able to beat Exxon Mobil to snag the top spot and the third largest in the global economy is Google has an estimated $342 billion stock-market cap).
Reading further down the list, it was only last year that several Chinese companies were included in the top ten spots. Two things are fairly apparent in the present market, first the markets are definitely fleeting, secondly the Fed only consider seeing the position that they are playing in creating the intended market surge if the aforementioned companies by maintaining near zero interest rates and alluring investors to place their investments in much riskier assets. It will now depend on whether they can choose to proceed with it or not.
There were several reasons regarded by technology analysts on why there is a difference from the tech bubble in the early 90’s. From a valuation point of view, it really isn’t as high-end to the obvious technology companies at present that has much better business model and clients wanting in their products.
Investors are also facing several internal strife where tapering would control price action that would have run off devoid of the fundamentals. It is a good thing in the long run, however this would mean that the portfolio will have to suffer along with the short-run with a bit of dynamic coercion. The question therefore that needs to be answered is whether or not there should be an end-of-year rally? Investors will have to carefully position themselves ahead of this would happen.