Over the past few days, there has been talk of the high volatility in financial markets that is causing the shift towards cyclical and high value assets. Immediately after the announcement from the pharmaceutical company Pfizer (NYSE 🙂 about the success of its coronavirus vaccine in clinical trials, stock markets began to strengthen around the world, but not all sectors suffered the same fate.
The reason for this is that there is a rotation or transfer of capital to the sectors that would benefit most when everything returns to normal after controlling the Covid-19 pandemic. The companies that benefited most from the pandemic were the companies that offered services and products for telecommunications and home entertainment. These companies include technology giants like Facebook (NASDAQ :), Amazon (NASDAQ :), Apple (NASDAQ :), Netflix (NASDAQ :), and Google (NASDAQ :), also known as FAANG companies).
That’s why it’s no coincidence that the technology index, among the pandemic, was the first to return to the rise after the initial fall at the start of the pandemic and began to record historical highs before and after the pandemic. . On the other hand, companies in the energy sector suffered most during the pandemic, as did the travel and tourism sector, the financial sector, and the industrial sector.
Oil fell sharply, and the future of WTI oil deteriorated as oil companies ran out of storage space and were almost paying to take up the oil they had. WTI oil stabilized at about $ 7 a barrel and then recovered to $ 40 a barrel.
The severe downturn in the economy was caused by the closure of a worldwide economy with the quarantines and restrictions put in place by governments to control the pandemic. As economies closed, air, sea and land transport were also disrupted. However, as economies slowly reopened, oil also began to rise, especially with the reopening of the Chinese economy.
Now that a promising vaccine for Covid – 19 has been announced, there is growing hope that everything will return to normal and the price of crude oil has regained momentum. Investors are shifting or shifting capital back to higher value companies and those who would benefit most from the economic recovery. The technology sector is in decline, as demand for products and services used during locks is expected to decrease.
Will it be too early to change cycle?
However, despite the strong rise in stock market indices worldwide, some analysts and experts warn that it is too early to determine whether the trend has reversed. Mobility restrictions still apply in some European countries and there is an idea in the United States that state borders could be closed.
It must be borne in mind, however, that stock markets are speculative and expected in the future. Although the vaccine has not yet been distributed, markets are moving in the hope that this will happen. But if for some reason the vaccine distribution is delayed, the stock markets could go back sharply.
The Nasdaq tries to stop its downward withdrawal
Since the start of this week, he has suffered a sharp drop that has brought him to the 11,500 point zone. However, during today’s session the index tries to stop the bearish pullback and return to the upside. Still, amid capital turnover, the technology sector remains important during the economic recovery and the Nasdaq is unlikely to decouple from the rest of the rising stock indices. On the other hand, the 12,000-point area could act as a resistance, with 11,500 points still the most relevant support.
Alexander London – Market Analyst, ActivTrades
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