The Real Reason Tech Stocks Keep Winning
The stock market is up this morning on “start of the month” buying for pension funds and other large financial institutions.
The S&P 500 did manage to close above resistance (red line in the chart below).
However, it is struggling to move into “the gap” established by the first leg down of the March meltdown (blue rectangle).
The bigger issue concerns the fact that the market is being largely driven by tech stocks. Health care, financial, and industrial stocks – which comprise over 50% of the S&P 500 – have effectively gone nowhere for several months now.
Here’s the breakdown in the chart below:
- Health Care Select Sector SPDR Fund (XLV) – Orange line
- Financial Select Sector SPDR Fund (XLF) – Blue line
- Industrial Select Sector SPDR Fund (XLI) – Red line
Meanwhile tech stocks have exploded higher, soaring to new all-time highs.
Why is this?
Intentional Market Bubbles
Because the large tech stocks (Microsoft, Apple, Amazon, Facebook) are where central banks are buying.
Together these companies account for nearly 20% of the stock market. And if central banks can get them to rally, the rest of the market will follow.
Put another way, if you were going to rig the market, these are the companies you’d be buying.
And with the same stocks moving higher day after day like clockwork, it’s pretty clear that central banks are doing the buying.
At the end of the day, it all boils down to what I’ve been saying since 2017…
The Fed is trapped in a vicious cycle through which it INTENTIONALLY creates bubbles to deal with each successive bust.
Editor, Money & Crisis