The gains are being driven by a narrow field of tech firms and investors should be cautious says financial advisory chief
Stock markets in Europe gained in early trading Wednesday following gains for Wall Street in the previous session after the Memorial Day weekend.
But while stock futures indicate that investors are gaining confidence as multiple economies begin to rebuild post-lockdown, many analysts are cautious about the road ahead.
Speaking about the recent equity rally, Katerina Simonetti, senior portfolio manager at UBS Private Wealth, told Bloomberg TV: “We hope that it will eventually lead to a normalization in the market, but we have to keep an eye on the re-emergence of virus cases.”
Jamie Dimon, CEO of JPMorgan Chase, was also optimistic when he spoke at a virtual conference Tuesday. He said the US economy could rebound swiftly, aided by federal programs.
“The government has been pretty responsive, large companies have the wherewithal, hopefully we’re keeping the small ones alive,” he said.
Unbalanced markets
But Nigel Green, CEO of global financial advisory deVere Group, believes investors should avoid over-optimism as the apparent strength of the markets is unbalanced.
“The headline figures of rallying markets are not the best barometers of the economy right now. The upswing on Wall Street, for example, is being driven by a handful of companies all within the same sector: tech,” he said.
Green says that the global economic downturn is not the same as most others as there are clear cut winners and losers depending on how much firms are impacted by the pandemic.
Tech, home entertainment, and online retailers have all benefitted from lockdowns, but will they still be winning post-pandemic?
“It doesn’t reflect underlying economic conditions – and this “could catch investors out,” Green said. “Buying an exchange-traded fund, or ETF, which are investment funds traded on stock exchanges, could expose a client to a potentially unbalanced market.”
