The NASDAQ hit a legendary milestone, touching 14,000 as vaccines pump optimism in the markets.
Investors were looking for a defensive asset in a low-interest-rate environment that can appreciate risk-off environments amidst the Coronavirus Pandemic. Investors found that in tech stocks, they showed their ability to generate pure cashflow during the Pandemic's peak.
Stocks like Facebook, Google, Netflix, and Amazon were able to continue to beat estimates while the bulk of the world was in lockdown. This became an overcrowded and popular trade amongst institutions and many retail traders. However, many are questioning whether they still justify the hefty premiums they gained during the global lockdown. Facebook currently trades at 26 times earnings, Google at 35.5x, Netflix at an astonishing 91.5x earnings, and Amazon at 78x earnings.
With the Federal Reserve continuing their $120 Billion buyback scheme, investors are now looking at the progress of President Joe Biden's $1.9 Trillion Stimulus Plan, bolstering the growth in the U.S labour market and the U.S economy. Matthias Scheiber, global head of portfolio management at Wells Fargo, stated that equities were driven by accommodative monetary policies and optimism on fiscal stimulus. However, analysts warn that this stimulus bill will have to be paid somehow, which will likely come from a higher corporate tax rate.
Luca Paolini, Chief Strategist at Pictet Asset Management, stated that "With the additional risks of corporate taxation, not only in the U.S but also in Europe like the U.K – there is a debate about raising corporate tax. So, for the next year, I think the riise in earnings will be much more moderate".
With all this euphoria in Wall Street, Main Street continues to suffer. While down from its all-time highs, daily new and the seven-day average cases are still over 100,00 in the United States, crippled by the lack of infrastructure regarding the rollout in vaccines in the United States.