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Why can good news for the economy hinder your 401 (k)?

NEW YORK (AP) – There is a huge shift in the stock market that could hit your 401 (k) in the short term, but what many professional investors are also seeing is leading to more long-term profits.

A big wave of optimism that the epidemic is on its way out has persuaded investors to turn their bets on where to put money. Most stocks in the market are rising, with the biggest profits coming from companies that will benefit most from a healthier economy, such as airlines and banks, after most of the epidemic.

But at the same time, all hopes are for an increase in bond yields, which in turn sends a bunch of tech stocks back to the country after most of the epidemic hit the market. When bonds pay higher interest rates, investors are less likely to pay the higher prices for the stocks that are considered the most expensive or have waited so long for their big growth forecasts to materialize.

Any weakness in the largest stocks due to the way stock indexes are calculated can mask the strength that pervades the rest of the market. That’s why the S&P 500 has grown less than 6% so far this year. Energy stocks have grown by more than 38%; financial stocks have fallen by about 17%, but technology stocks, which account for more than a quarter of the index market. value, increased by less than 2%.

All that clutter under the surface can be heard inside baseball, but it has a big impact when 401 (k) scores are more than ever tied to the performance of other S&P 500 indexes. More than half of U.S. equity funds directly copy the indexes, Morningstar said.

In other words, your 401 (k) may fall even if most of the shares in the economy և market rise. This is a mirror image of what happened at the beginning of the epidemic, when the S&P 500 was stronger, despite the economy falling into a terrible hole. And professional investors say this segment rotation still works.

“It takes me back to business school, where we learned how all the indicators are different,” says Villere & Co. of New Orleans. portfolio manager Lamar Wheeler. “It seems so boring academically, but there is no such thing as a monolith called the stock market. “These are huge areas of the market that are moving in different directions.”

Investors have already felt these steps in recent weeks, as inflation expectations և economic growth suddenly rose as COVID-19 vaccines began to spread և Congress reached its $ 1.9 trillion economic rescue.

Nasdaq Composite fell more than 10% from February 12 to March 5, բազմաթիվ many of its technology stocks were damaged by a sharp rise in yield. The S&P 500 also fell 2.4% during the period, but more than half of the index shares rose during that period.

Marathon Oil այլ other energy producers were the leaders, some more than 20%. The sailors sailed much higher. If the economy is booming soon, as almost everyone on Wall Street predicts, the profits of these types of companies should jump far more than the large tech stocks that actually benefited from the household.

That’s why, if the S&P 500 is toppling down because of the downfall of just a few companies, Wall Street needs to take it seriously. Many analysts and professional investors expect the improving economy to boost corporate profits, rather than offset any slippage caused by the forthcoming growth, and they expect the S&P 500 to rise higher next year.

Since their last collapse, tech stocks have returned as inflation concerns eased slightly. The technical stock revival on Monday helped the S&P 500 return to record highs. And even if the shine never fully returns to tech stocks, many continue to make huge profits supporting their stocks, such as Apple և its nearly $ 29 billion net income in the last quarter.

Many professional investors, however, expect that the rotation of technology stocks այլ other beaten areas of the market will continue for a little longer. Technical և high-growth stocks continue to look much more expensive than the rest of the market, են high interest rates make that gap seem more pronounced. That could put pressure on the S&P 500’s indexing funds to back it up.

High-growth stocks over the past 15 years have largely moved away from their cheaper-valued competitors called value stocks, says David Oy oy, chief market strategist at Ameriprise. In the long run, the payback can be just as long.

Of course, with such long-term trends, the market can move back and forth several times. Shares of value for this latest move և Outside of high-tech stocks, move said he thought there were probably months left.

“If I had to guess, it might have been done in the middle of two-thirds,” he said, “but there still has to be room.”

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