- Nasdaq 100 companies are making a killing amid the pandemic.
- Global liquidity is a huge factor behind the recent stock market rally.
- The smart money will eventually find its way to fundamentally sound companies.
The Nasdaq Composite (IXIC) is slaughtering bears in a time of global crisis. The benchmark index is 4% shy of its February all-time high. Simply put, the pandemic is making people more reliant on technology than ever before.
Nasdaq 100 Companies Are Growing Amid Pandemic
The tech-heavy index, which includes names such as Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB), has performed better in a pandemic-induced bear market than other indices. While multiple sectors of the economy have shuttered as shelter-in-place orders swept across the United States, the tech industry prospered.
The Nasdaq Composite is making a remarkable recovery. | Source: TradingView
Last week, e-commerce giant Amazon posted a fresh all-time high of $2,525.45. The tech company reported first-quarter revenue of $75.4 billion, up 26% year-over-year. That number translates to $10,000 worth of sales per second as quarantined customers relied on the company to fulfill their basic needs.
On May 26, Facebook not only completed a V-shaped recovery, but it also clocked in a new all-time high of $240.90. The social media giant rolled out Facebook Shops, which allows users to more efficiently list their products on Facebook and Instagram. In a time of crisis, Facebook has managed to release a new feature that can potentially drive $30 billion in revenue.
Also, on May 26, chipmaker Nvidia (NASDAQ:NVDA) hit an all-time high of $367.27 as demand for high-end tech products skyrocketed. Nvidia’s data technology revenue surpassed $1 billion in the first quarter of 2020, beating analysts’ expectations and helping the firm post a net income of $917 million.
Many tech firms are posting similar figures, suggesting that the industry is thriving.
Global Liquidity to Boost the Stock Market
Like the Nasdaq 100, the S&P 500 and the Dow Jones Industrial Average have also posted remarkable recoveries since the panic-induced selloff in March. The improvement is largely attributed to surging global liquidity.
The stock market is being propped up by an excess in liquidity. | Source: Twitter
According to the Federal Reserve, the money supply (M2) has climbed from $15.59 trillion at the start of the pandemic in March to $17.99 trillion this month. Meanwhile, the Fed’s balance sheet has topped $7 trillion for the first time in history.
There’s a lot of money to go around, and equities continue to post gains despite questionable fundamentals. Companies listed in the Nasdaq 100 are booming. This is the reason why the Nasdaq Composite will outperform other indices.
Eventually, smart money investors will leave weakened companies and make their way to high-growth tech firms. When that happens, the Nasdaq will likely surge to a new all-time high.
Disclaimer: This article represents the author’s opinion and should not be considered investment advice from CCN.com. The writer does not own any of the above mentioned assets.
This article was edited by Sam Bourgi.
Last modified: May 29, 2020 6:51 PM UTC