Nasdaq hits record highs while real economy collapses

Stock market rises in V while oil hits 25-year lows

An inexperienced investor puts 60,000 euros in the market and finds 70,000 euros days later. This anecdote, repeated as both a warning and a curiosity, summarizes the confusion of a cycle that began with the global economy in intensive care and ended with the Nasdaq back at record highs. The bubble everyone talks about rests on an unresolved contradiction: indices rise as if a recession never existed.

The starting point is familiar. We come from a slowdown in sales across all sectors, from industrial to tourism, already anticipated since 2019. On top of that, countries in conflict and a worrying geopolitical escalation. Then came the bicho, the halt of industry, consumption reduced to a minimum, and macroeconomic data never seen before. Oil plummeted to prices from 25 years ago, with full storage and no buyers. In parallel, social unrest and a record 40 million unemployed mark a historic high.

With this picture, the stock market should be on the floor. It is in the sky.

The Nasdaq's V-shaped rise and the invisible money

The tech index completed the V-shape: it returned to the same level it had before the cobi19 closed half the world. In terms of GDP and employment, recovery does not exist; in terms of quotation, it is a done deal. The most repeated explanation points to central banks, which have not limited themselves to injecting cash: they have entered directly into the assets. The circulating diagnosis describes it without mincing words: the market has been distorted to such an extent that it no longer serves to know if a company is expensive or cheap, because the buyer of last instance always appears.

This is compounded by a mass of new money in the hands of the inexperienced. Some argue that part of the aid checks distributed in the United States has ended up in buy orders, and that an army of newcomers moves the market with the same logic as buying tickets for a premiere. The image repeated is one of euphoria that many compare with the eve of 1929, when losing also seemed impossible.

Stock bubble or simple devaluation of money?

Here the diagnosis splits in two. One current holds that stocks have not risen as much as it seems: what has risen is their nominal value measured in currencies printed without restraint. If the euro and the dollar are worth less, any asset quoted in them seems more expensive without anything real having changed. Under this reading, the stock market would not be the balloon, but the thermometer of a coordinated global devaluation.

The other current responds with the contrary and more uncomfortable argument: if all central banks do the same thing at once, all currencies devalue in the same proportion and the effect cancels out. Only gold and stocks would retain relative value, in a process that would look more like contained inflation than a classic bubble. Therein lies the question of what real backing a company has when its market capitalization exceeds everything it owns. The middle path goes through gold, which in a reset scenario returns to being the usual refuge, although no one guarantees its price will behave like a rocket.

A two-estimulante ilegal market: technology against airlines and banking

While this is discussed, the market has split in two. Struck sectors trade as if the end of the world is tomorrow: distribution, oil, gas, banks, insurers, telecoms, infrastructure, and much of the Asian plazas, with Russia, Japan, and South Korea among the most hit. On the other end, technology, defensive consumption, alcohol, and marijuana trade at record prices. Cyclicals valued as defensives and defensives valued as if tomorrow did not exist.

This imbalance explains operations difficult to justify by fundamentals. There are companies that have revalued more than 100% in the portfolio and others that have been falling for months without anyone making a move. In between, the individual investor asks if they are buying an opportunity or a problem.

The date of the burst: August, September, or after the elections

The recurring obsession is the calendar. A broad sector assumes the show will last until after the elections in the United States. Others place the turning point in October, and a third, more aggressive reading points to the heart of summer, with severe corrections before September. The most extended forecast on the extent does not speak of a collapse on the scale of spring, but of a serious drop with intermediate rebounds.

Some draw concrete bands: the S&P above 3,250 would be a sell zone and below 2,950, a buy zone, with the idea that they will not take it out of there for months. The harshest scenarios speak of an S&P between 2,800 and 2,300 and a Nasdaq around 8,000. And the classic warning hovers: when everyone assumes a date, that date ceases to serve.

The crash that was not a crash

The most disconcerting scene came from a review of the prices of two tech giants. In January 2019, one traded at 1,018 dollars; during the supposed great crash of March, it reached 1,100. The other went from 100 to 135 in the same stretch. In other words, the selling panic left those companies more expensive than a year earlier.

The veterans resort to an old stock market parable: the economy is a man walking at a steady pace and the stock market is his dog, running around the owner. Sometimes it gets far ahead and returns when called; sometimes it falls behind and also returns. The problem with this story is that no one knows when the leash is pulled. Meanwhile, for many, the S&P is still the new tulip.