A state of tension overwhelms the US stock market, as the recent decline of the S&P 500 (S & P500) has increased 10% of investor problems, but the increasing uncertainty about policies, in addition to the major concentration in limited stocks, is difficult to determine the exact cause of market issues. There are two basic weaknesses: the first is visible, and the other is less clear. The clear point is the successive decisions and statements of the White House, which directly affect companies, especially in the field of commercial policy. As a result of this tension, some corporate managers, who are usually far from politics, publicly expressed their dissatisfaction with the economic agenda of the US administration. The other weakness point is the big bet of the S&B 500 index on the shares of the Great Technological Companies group, known as the ‘Seven Greats’, which represents almost a third of the weight of the index. Just as these businesses have supported the market thanks to their incredible growth for years, any slowdown in their performance will have a major negative impact. These two threats will appear in different ways. The trade war will further harm the sectors targeted by customs duties, such as energy, industry, materials and consumer products. While the slowdown in the large technology companies is the group “The Seven Greats”, which: “Apple”, “Microsoft”, “Invidia”, “Amazon”, “Alphabet”, “Mita” and “Tesla” will hit it directly. Technology shares are loved by “S&P500”, when we look at what happened during the last sale wave, we find that all companies under the ‘seven big ones’ are a decrease, and their average decline has reached 14.4%, and the losses of this group were responsible for about half the total decline of the “S&B 500” index. As far as the rest of the shares in the index are concerned, its performance was better, as about a quarter of the shares achieved profits during this period, while the average decrease reached 6.6% when the ‘seven big’ was excluded. Sales also did not focus exclusively, or even large, on companies directly affected by customs duties. For example, the sectors in the industrial and consumer products have seen relatively well, and were one of the shares that achieved the profits of companies such as the Ford car manufacturer, and the chain of grocery stores “Kroger Co.). In US stocks, a re -evaluation of the future of huge technology companies is more than a response to the fear of customs duties. 2%, indicated by Federal President Jerome Powell last Wednesday. Where the yields of US Treasury bonds have recorded a decline in recent weeks for two years and ten years, while the binding rate has remained for five years (the difference between nominal yields and modified returns by inflation) at a level of close to 2.5%, after approaching in September. Here, the problem is not that major technology companies are especially vulnerable to poor economy, but that the large size offers them better relative protection than most other sectors. But the group ‘Seven Great’ has grown at a very incredible rate and for many years, and any decline in the growth rate of extraordinary levels to more ordinary levels will in itself be a major setback. It will deliver shadows on S&B 500 in general in the gloomy, and it can have more influence than any political decision or event in Washington. This is due to the fact that these giant technology companies were the most important driving force for most profits that the market has recorded at least over the past decade. For example, the ‘Bloomberg’ index of the ‘Seven Great’ group increased by 36% annually between June 2015 and February (except for profit distributions), which is twice the historical rate of the broader market index, which is about 6% annually since 1928. If we remove these seven companies from the index, the annual return of the ‘S&P 500’ is, as 2015 to a normal and outdated is only 5%. The fastest wolf It is important to note that the exceptional rise in these businesses was not the result of a speculative wave, such as those we saw in the 1990s (with Internet businesses) or the 1960s (known as the Nifty Fifty Group) whose evaluation bubble increased. On the contrary, the current success is due to one of the fastest growth waves in the profits of enterprises registered. Since 2015, the profits of the Arrow have grown to the group ‘Seven Greats’ at an annual rate of 37%, or more than five times the rate of historical annual profit growth for the “S&B 500” index since the 1950s. On the other hand, the rest of the businesses were not weak; The annual profit rate rose by about 8% in the same period, but prominent growth remained modest compared to the number of enormous technology companies. As the growth of profits (not the high judgments) has led the shares of the ‘seven large’ group to the height, it is logical that the shares have recently declined due to a change in future expectations for profit growth, which is now expected to be less. This analysis supports the assessments of these companies, which are still relatively high but not excessive or illogical (except for the “Tesla” arrow). For example, the value of the “alphabet” share is currently 17 times compared to the following profits of 12 months, while the value of “Meta” is about 22 times, and the rest of the companies vary in the range of the average twenties. These numbers are not much more than the average evaluation of the rest of the index, which is about 20 times. If the market continues to focus on the “seven big ones” businesses, the ‘S&B 500′ index will see more declines, even if many other companies’ shares are improving within the indicator. In this case, the losses of the index may coincide with political developments in the US capital, but it will not necessarily be linked directly to it. The opposite can also occur completely; If the trade war escalates significantly, small businesses (which do not have enough ability to give the high cost to the consumer) can bear most of the burden, while large technology companies are less affected. In this case, the S&B 500 may seem relatively calm, although many businesses are affected. The only thing that is certain in this context is that a wide market is controlled by the performance of only seven businesses is not an accurate or good indication of what really happens in the economy and markets.
The “S & P500” index was not due to the trade war. What is the reason?
