- The U.S. economy offers more stable growth and American securities promise more secure cash flows and yield than a globe beset by woes like the coronavirus.
- Among the winners is the Vanguard Mega-Cap Growth ETF, made up of large companies viewed as having the most reliable future growth and profitability in these uncertain times.
- But valuations and strange moves in speculative-growth stocks like Tesla could be raising some red flags.
The way markets have been acting this year, treating high-quality American assets as a haven, makes sense. But even a sensible move can reach extremes and create distortions.
The trick is trying to figure out when rational activity takes conditions to a riskier place. It’s unclear we’re there yet.
That’s right — even though the coronavirus outbreak upended expectations for an early-2020 economic reacceleration led by trade and manufacturing — the fact the S&P 500 is at a record high, and the manner it got there, are not illogical.
Government bond yields have rushed toward last summer’s lows, investor cash has hurried into bond funds, credit markets remain generous, the U.S. economy offers more stable growth and American securities promise more secure cash flows and yield.
In response to the vast uncertainty of Chinese economic performance, the U.S. has outperformed the rest of the world, and within the U.S. market, secular growth and defensive stocks have propelled the gains and had their valuations expand.