Year 2020 to date the Nasdaq Composite is down circa 17%, while the Dow Jones Industrial Average(DJIA) and Standard and Poor's 500 indices are down circa 23-25% since the beginning of 2020.
What is the reason for the Nasdaq Composite outperformance?
One obvious reason is the dramatic decline of the price of oil. Both the WTI Crude Oil and Brent Crude Oil are down between 54% and 60% since the beginning of the year due to both the coronavirus disease COVID-19 and the price war that erupted between Russia and Saudi Arabia. DJIA is comprised of 30 stocks, of which Exxon Mobil, Chevron Corporation and Dow Inc., which are all tied closely to the price of oil. In the Standard and Poor's there are many oil and chemical companies which fortunes are directly tied to the price of oil. Oil production companies basically live and die with the oil price fluctuations. So the abrupt fall of the price of oil seems to be the main reason why Dow Jones Industrial Average and Standard and Poor's 500 indices have fallen markedly more than the Nasdaq Composite.
Another reason is that since almost everybody is now working from home which implies heavy use of collaboration software produced by Microsoft(Teams, Skype), Zoom Video Communications. Amazon is on top of its game with home deliveries of almost everything. Video streaming companies like Netflix, Walt Disney Company, Comcast(Hulu) and the owner of YouTube Alphabet Inc. are seeing surging demand for their services. What is more, Alphabet Inc. is probably experiencing a surge in its Google search engine queries. Social media giant Facebook and its smaller counterparts like Twitter and Snap(Snapchat owner) should also see a more frequent use of their services.
However, if things get really dire globally like for example now in Italy, I doubt anybody will choose to stay in front of Facebook and Twitter before taking to time to feed themselves and their families and survive this health, economic and social nightmare we are experiencing.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
No comments:
Post a Comment