Detail from Tesla store in Milan, Italy. Image source: Goran Bogicevic © 123RF.com
Yesterday was a day of heavy trading on the American stock market, and the rally was led by a massive jump in tech stocks. The bullish run was also inspired by a sizable advance of Chinese stocks early in the morning.
The Shanghai Composite index rose by 5.71 per cent on Monday after the controversial Security Law was passed in Hong Kong.
Despite heavy protesting by local citizens and the international backlash that the Chinese Communist Party received over its attempts to stifle civil unrest in Hong Kong, the law was implemented with relative ease nonetheless.
Chinese investors saw this as a step towards mitigating the political tensions in the region, which is what inspired yesterday's rally of the SHCOMP.
The bolstered investors' outlook from China had a positive spillover effect on US tech stocks following the market open, with notable gains for Tesla, Amazon, and the Nasdaq Composite.
The former registered the staggering 13.48 per cent appreciation, whereas the latter advanced by 5.77 per cent. The Nasdaq Composite index generated moderate gains of 0.85 per cent as well.
The solid performance of Big Tech in the aftermath of the coronavirus market crash was initially attributed to investors' desires to flee to stable securities as the turmoil was unfolding.
In early April the bullish run was initiated, and US tech stocks exhibited considerable resilience to the prevailing uncertainty at that time. They were used as hedging tools against the continuous market tribulations.
The nature of the market crisis has changed since then, but the appeal for such shares is no longer prominent mostly amongst investors seeking to hedge their risks. Tech stocks are now being used increasingly as tools for value investing, instead of merely as temporary safe-havens.
All of this means that the Nasdaq composite index has remained quite stable even as the nature of the coronavirus fallout is changing, which is a favourable prerequisite for the continuation of the ongoing recovery process.
The 4H comparison chart below elucidates the transition of tech stock's appeal amongst investors as the nature of the market rout was changing.
Amazon's stock was the best performer during the height of the market slump, as the company's operations were significantly bolstered during the lockdown. This trend encompasses the aforementioned appeal of tech stocks as tools for hedging at times of great uncertainty.
Meanwhile, Tesla's jump above Amazon on the 29th of May underpins the changing allure of tech stocks, from being perceived as hedging tools into being regarded as tools for value investing.
US Stocks 4H Comparison Chart. Image source: Trendsharks ©, created with TradingView.com
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