The stocks of Wall Street have climbed a recorded high over worries on the Federal Reserve’s monetary policy and the U.S.-China trade relations. However, investors are sticking to defensive stocks and technology shares. Strategists say, that even if the stocks rise in the near term, the pattern is unlikely to change as the investors will prefer shares of companies with solid earnings and growth prospects.
The 36% gain in technology shares have helped the S&P 500 to earn 22% this year in large part. The S&P 500 includes two major tech companies by market capitalization, Microsoft Corp. and Apple Inc. Roughly a third of the benchmark index’s gains were from the tech stock market, where Microsoft shares have surged to 41% and Apple to 62%.
On the other hand, the shares of the real estate also rose by 26%, which accounted for the second-highest gain in the S&P.
In the S&P 500, a third of small-cap companies listed in the Russell 2000 index with no net income have underperformed. Additionally, the shares of companies that have gone public this year have also shrunk. These companies include Slack Technologies Inc., Lyft Inc., and Uber Technologies Inc.
According to David Joy, chief market strategist at Ameriprise, the investors are not going to buy anything indiscriminately. They want to see some prospects for earnings.
In October, the S&P 500 noticed a shift in trading patterns with the underperformed defensive shares. This is expected to be due to the third rate cut by the Federal Reserve and the limited trade agreement between the United States and China. Simultaneously, the value shares with relatively low price-to-earnings ratios also rose. In the past two months, the Russell 1000 Value index outperformed Russell 1000 Growth index. Despite the improved value of shares, there is an urgent need to concentrate on finance, economically sensitive sectors. However, according to the investors they are reluctant to make bold choices until economic data rebounds.