U.S. Big Cap Stocks Turn Into World’s Top Haven as Risk Rises

(Bloomberg) — Investors are scrambling for safety as risks mount, from the war in Ukraine to rising interest rates and a global recession. They have found it in the U.S. stock market — particularly the biggest American companies.

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The S&P 500 Index is up more than 8% over the past two weeks, recouping all of its losses since the Russian invasion on Feb. 24. Meanwhile, the tech-heavy Nasdaq 100 has gained almost 11% over the same span. With earnings looking strong and corporate outlooks improving, there are reasons to think these gains can hold despite the myriad risks facing global equities.

“It bothers people because they feel like the market is heartless,” Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments, said in a phone interview. “And that’s correct.”

Read: Market Gloom Triggers BofA’s Contrarian ‘Buy Signal’ for Stocks

The fighting set off a spike in commodity prices, stoking inflation that already was at a four-decade high. Meanwhile, sanctions on Moscow threaten to weigh on global economic growth. Recession risks in the U.S. are also piling up, with parts of the Treasury yield curve inverting as the Federal Reserve embarks on a new tightening cycle.

Perhaps most puzzling is the fact that the world’s biggest stock markets haven’t collapsed. The STOXX Europe 600 Index is basically flat since Russia invaded Ukraine. The MSCI AC Asia Pacific Index is down a little more than 3% in that span and the Nasdaq Golden Dragon China Index has lost around 7.5%, largely because of growth fears and the risk of Chinese firms being kicked off U.S. exchanges.

For now, American stocks appear to be the best option for global investors, particularly compared with bonds. The return on global government debt weighted by world GDP is on course for its worst year since 1949, according to Bank of America.

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“The view is we should just rotate to sectors which are more favorable to the situation, because there’s really not much of an alternative to equities,” said Ilya Feygin, managing…


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