New records on the American stock exchange are again attracting investors' attention. Both the S&P 500 and Nasdaq 100 futures contract indicate the possibility of opening the cash market at its historic highs.
On the one hand, the American stock exchange seems to be supported by the financial results of US corporations, and on the other hand, new reports on the fight against the coronavirus. The Food and Drug Administration has announced that it authorizes the use of plasma from the blood of the healed as a treatment for COVID-19. Nevertheless, the U.S. stock market is becoming more and more fragmented. We are talking about the concentration of companies in the S&P 500 index. The 10 biggest companies have almost 30 percent share in the whole index. In turn, the 5 largest companies have almost 25 percent share in the entire index. This may show how much the American stock market is on the rise thanks to a small number of companies. Historically, the increase in market concentration caused a possible peak, and consequently a greater correction. However, this is always difficult to determine over time.
In addition, the storming of individual investors on the stock exchange, to whom institutions can now sell shares without any problem, may be a concern. All over the world, so-called retail traders have thrown themselves on the stock market. In Germany, for example, in the first quarter of 2020 alone, almost 14 billion Euros were flown into the stock market. For comparison, the average since 2018 was around 4.5 billion euros per quarter. This applies not only to Germany, but also to Poland or the United States and is a very interesting mass phenomenon, which we have not seen for a long time. The last time was in 2007.
It is also worth noting the oil market, which seems to be very calm recently, but here the situation may change due to weather factors. At the weekend, Hurricane Marco and tropical storm Laura hit the Gulf of Mexico. As a result, 58% of oil production at sea was closed, and onshore production of natural gas was reduced by 45%, CNBC reported. However, it must be remembered that the still raging epidemic in the United States strongly limits the demand for oil, balancing the impact of the storm.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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