The pandemic has forged new safe haven investments

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“Traditional stocks have not performed as well as the Nasdaq,” said JJ Kinahan, chief strategist at TD Ameritrade.

It’s technophile Nasdaq (COMP)hit a record high on Monday, and the index is up 19% for the year. All three major US indices have rebounded from March lows and are once again flirting with record highs, but the S&P 500 (SPX) is still more than 3% below its peak reached in February. the Dow (UNDUE) still has more to do – it’s 9% below its record high.

Traditional safe havens have been rocked by a dramatic drop in consumer spending during the pandemic. Even as the economy recovers, consumer staples are not selling through all the channels they were used to as live events and sports remain on hold.

While many sectors have rebounded, the crisis has changed the way investors think about where to put their money on a rainy day.“I want to go somewhere where a stock can still do well during a shutdown, and that’s the technology,” Kinahan said.

Technology companies, especially mature companies like Microsoft (MSFT), Apple (AAPL) or the parent company of Google, Alphabet (GOOGL), could appear more stable during a shock such as pandemic lockdown. Tech companies have also been able to adapt faster to the normal new pandemic, and some products, like cloud services, have performed well during the lockdown and will not disappear during a recovery, Kinahan said.

Investing in Big Tech has been popular for some time now. It has worried some investors that the valuations of the biggest names in the S&P 500 have reached unsustainable highs. But they don’t have to worry, said Jonathan Golub, chief US equities strategist at Credit Suisse.

The current top five of the S&P – Apple, Microsoft, Amazone (AMZN), Google et Facebook (FB) – Capture a high percentage of earnings and generate faster growth, while their valuations are also lower than other S&P stocks, Golub said.

Income disaster

The stock market rebounded from the dramatic sell-off of Covid-19 in March just in time for what will likely be one of the worst earnings seasons of all time.

Companies are reporting on their performance in the second quarter, which included a complete lockdown from the pandemic and a gradual reopening of the economy.

Earnings reports will point out that certain sectors, including technology, communications and healthcare, are more resilient in the face of this unprecedented recession, according to Capital Economics chief market economist John Higgins.

While the technology is flourishing, other sectors may need greater economic wind to develop.

“Stronger economic growth is needed for some real asset sectors, such as infrastructure and energy, to achieve more sustainable long-term gains,” said Terry Sandven, chief equity strategist at US Bank Wealth Management.

The energy sector has recovered somewhat since oil prices fell into negative territory in April, but the industry needs economic growth to stimulate demand for its commodities.

This earnings season, a CEO with a plan is more important than ever, Kinahan told CNN. It’s been a tough time for everyone, but now it’s a question of how to step into the future.

“More importantly, they should say how they’re going to cut spending. That’s what the streets want to hear, how they’re going to cut costs, ”Kinahan said.

Reducing costs can be done in a number of ways, including eliminating projects or jobs.

As US companies try to emerge from the crisis, the country’s labor market remains struggling. The unemployment rate has declined from its April peak, but is still higher than it was at any time during the 2007-09 financial crisis.

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