Stay informed with free updates
Simply sign up to the US equities myFT Digest — delivered directly to your inbox.
The S&P 500 has hit a record high, as strong corporate earnings and investor optimism over a US-Iran peace deal drive a sharp rebound from losses suffered in the early weeks of the war.
The blue-chip index rose 0.8 per cent on Wednesday, closing above 7,000 for the first time.
The fresh high — which came after President Donald Trump said the war could end “almost immediately” — caps the biggest 10-day gain for the S&P 500 since the rebound from the Covid-19 pandemic sell-off in 2020, as investors turn their attention from the Middle East energy shock to bullish forecasts for earnings growth in corporate America.
“Markets are defying the war,” said Nanette Abuhoff Jacobson, global investment strategist at Hartford Funds.
“The market is taking out the worst-case scenario with the ceasefire in effect,” she added.
Big technology stocks have led the rally in recent trading sessions.
While the S&P 500 has risen more than 10 per cent from its conflict low — reached on March 30 — tech shares in the index have climbed more than 15 per cent in that time. Chipmaker Nvidia has soared 19 per cent.
“The rally in the past two weeks has been entirely justified,” said Max Kettner, chief multi-asset strategist at HSBC. “What ultimately really matters is what earnings are doing, and here we’ve seen upgrades in March, especially in AI and tech.”
At the height of the Middle East conflict, which began on February 28, the S&P 500 had fallen almost 10 per cent from its January high, as oil and gas prices soared and investors started to price in interest rate rises by the Federal Reserve to stem the resulting inflation.
Losses on Wall Street were less dramatic than those in Europe and Asia, with the status of the US as a net energy exporter expected to shield it from the global energy shock.
Even so, the scale of the rebound had been “impressive”, said analysts at Deutsche Bank.
“This is in the midst of everything. I think we are doing very well,” Trump told Fox Business on Wednesday. “Nobody thought we could be at . . . 7,000 on the S&P.”
Over the past month, investors have poured more than a net $111bn into US equity funds, according to Bloomberg data. European and Asian funds, on the other hand, have seen net outflows.
A closely watched investor survey by Bank of America this week showed global fund managers increasing their allocation to US assets and the tech sector in April, while reducing exposure to Japanese and Eurozone assets.
Investors point to lower valuations of US stocks, which they say are fuelling renewed interest in the market. Falling share prices during the Iran war, combined with rising earnings expectations, have pushed the price-to-earnings ratio on the index to its lowest level since the “liberation day” sell-off last April.
The BofA survey also showed the proportion of fund managers saying US equities are overvalued at its lowest level since 2019.
This article has been amended to reflect that the US is a net energy exporter, not importer
Credit: Source link
