Hot stocks: Wall Street is where the action is

With share prices volatile again, our head of markets reports where the hot money is going right now. 

The rollercoaster ride continues as US investors ponder the economic effects of the coronavirus pandemic.

Of late, there have been some concerns as some US states have reported fresh spikes of the virus, with infections picking up pace in Arizona, South Carolina, Florida and Texas.

However, there are increasingly positive signs that a vaccine breakthrough may not be too far away.

With the Covid-19 situation therefore finely balanced, so go the markets.

The debate continues as to whether the current recessionary environment will result in the usual cyclical resets, or whether this time there will be more structural impacts.

Our increasing reliance on technology has come into sharp focus, particularly over these last few months.

On the one hand, technological advances are already being used to identify potential vaccines for the pandemic, reduce the effects of the virus in chronic cases through the use of steroids and enabling the tracking and tracing of specific outbreaks to enable further lockdowns on a local basis if necessary.

At the same time, working from home has become the norm for a significant proportion of workers in developed economies. Meanwhile, some companies have seen the benefits of enforced lockdown, be that through gaming apps or viewing habits, as people look to fill their social time in a different way.

For the markets, it is technology where the action remains.

In the year to date, the Dow Jones Industrial Average remains down 8% and the S&P 500 3%, but the technology-laden Nasdaq index has not only recouped its losses from earlier in the year but continues to break through record highs, and is up 13% in the year to date.

If inventor Nikola Tesla were still with us today and had invested in his own name, he would have had a very profitable 2020.

The eponymous shares which bear his surname have risen by 138% in the year to date. Perhaps lesser known is the hybrid truck design company Nikola, also named after him, whose shares have climbed by 600% since coming to the market by way of a placing in early June.

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Conference calls have taken on a whole new meaning since the lockdown and one of the better-known beneficiaries has been Zoom Video Communications (NASDAQ:ZM). Its shares, listed as Zoom Video Communications, have risen 269% so far this year.

Other positive factors seem to be at play in this space.

The recent (and positively surprising) US retail sales figure was perhaps a good omen for economic recovery. Several reports subsequently made the point that consumption patterns have also changed, with one suggesting that US e-commerce penetration had increased as much this year as in the ten years prior. Will this acceleration continue?

In addition, there is also a new type of user. It seems that the more mature sections of the population have moved to use technology in a way which could not have been foreseen – and may not have been possible - without the catalyst of the pandemic.

Perhaps not surprisingly, therefore, some of the tech majors now find themselves ahead in the year to date, despite the challenges of broader social, market and economic pressures.

Facebook (NASDAQ:FB) shares have added 17%, Amazon (NASDAQ:AMZN) 47%, Apple (NASDAQ:AAPL) 22%, Netflix (NASDAQ:NFLX) 45%, Alphabet (NASDAQ:GOOGL) 8% and Microsoft (NASDAQ:MSFT) 27%.

Of particular note is the sharp recovery each of these have made and, if measured since the March lows, the gains are even more impressive  - Facebook shares have gained by 64%, Amazon 62%, Apple 60%, Netflix 57%, Alphabet 38% and Microsoft 48%.

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Overall, there remains some way to go, especially with heightened unemployment numbers, with government aid schemes running out in July and August in different countries, which will add to the time pressure of the economic recovery.

At the same time, consumer confidence remains unclear, particularly with regard (but not limited to) overseas travel and tourism in general. 

There will be any number of figures to watch closely in the coming months – hotel occupancy rates, retail footfall, restaurant reservations, auto sales – in order to gauge the consumer’s propensity to spend.

In any event, from a market perspective there is little reason to imagine that the second half of 2020 will be any less interesting than the first.