War between Bulls and Bears Post Corona Virus Pandemic

 

S&P 500 surge: What's fuelling the index? Brokerages raise targets given current rally

Updated : August 28, 2020 08:30 PM IST

Post-COVID, the Federal Reserve has pumped in trillions of dollars to ease the economy as well as keeping short-term interest rates anchored near zero.

The tech stocks like Google, Netflix and Amazon made up over 37 percent of the benchmark index.

CitiGroup recommends investors to diversify the portfolio with a combination of risks and defensiveness, said chief US equity strategist Tobias Levkovich to Forbes.

MOUSUMI PAUL

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The US market is in an overwhelming phase backed by the recent statements coming in from the Federal Reserve on maintaining accomodative stance. This has sent all indices soaring, with S&P 500 erasing pandemic losses to hit lifetime highs for five days. Following this uptrend, major brokerages have raised their target price on the index, thus fuelling the wave of optimism in the Wall Street.

What seems peculiar here is that the US market is hitting record highs amidst tensions with China, pressure from the pandemic, million Americans without jobs, upcoming indecisive presidential elections and a free falling economy.

Post-COVID, the Federal Reserve has pumped in trillions of dollars to ease the economy as well as keeping short-term interest rates anchored near zero. The recent statement on the monetary policy by Fed chairman Jerome Powell acts as a shield against rising market valuations and any major correction in the market, said CitiGroup analysts.

Powell signaled that the Fed's policy will remain accomodative as it seeks to stimulate the US economy. He also announced new approach to inflation that could keep interest rates lower for longer, reported CNBC International.

Image Source: Markets Insider

The highest bet that the investors are placing now is on the technology space. The tech stocks like Google, Netflix and Amazon made up over 37 percent of the benchmark index. This wasn't seen even during the dot-com crisis, back in 2000. In fact, seven out of 10 S&P 500 top performers this year are tech stocks, according to CNBC.

CitiGroup recommends investors to diversify the portfolio with a combination of risks and defensiveness, said chief US equity strategist Tobias Levkovich to Forbes. The global brokerage house see S&P 500 reaching 3,600 by mid-2021.  Others like Goldman Sachs and RC Capital Markets have also upped their forecasts on the index.

While many believe that the market rally will continue to stay, some are denying it. However, the biggest concern is that if the tech stocks start to decline then the entire index i.e. S&P 500 will plunge, erasing all the gains that it made in the last couple of months.