'Blue Wave' Fueled US Stock Market's Record-Breaking Surge

Rising Trend Expands Despite Uisadang Incident
Traditional, Technology, and Eco-Friendly Stocks All Strong
Warnings of Short-Term Sharp Rise
Tesla's Elon Musk Becomes World's Richest Person

On the 7th (local time), when the Dow Jones Industrial Average and the Nasdaq each closed above 31,000 and 13,000 points for the first time ever, an employee at the New York Stock Exchange was conducting trading operations.
[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. New York stock market soared to an all-time high, overcoming the Capitol Hill riot that occurred the day before. The 'Blue Wave,' signifying the Democratic Party's control of the Senate and President-elect Joe Biden's victory, also reshaped the global wealth rankings. Experts have advised caution, noting that the U.S. stock market has surged sharply in a short period.

On the 7th (local time), the Dow Jones Industrial Average closed at 31,041.13, up 211.73 points (0.69%), the S&P 500 rose 55.65 points (1.48%) to 3,803.79, and the Nasdaq Composite increased by 326.69 points (2.56%) to 13,067.48.

◆ Rise of Reflation Trades = After the runoff Senate election in Georgia, Biden's certification, and the Capitol riot were settled, the market maintained a strong upward trend throughout the day. With uncertainties removed, the Dow surpassed the 31,000 mark, and the Nasdaq broke through 13,000. The S&P 500 also exceeded 3,800, setting a new record high.

The broad strength across traditional and tech stocks was due to growing expectations and reduced concerns about the Biden administration's policies. The perception that the Biden administration is poised to implement active fiscal policies lifted bank, semiconductor, and small business stocks. Ross Mayfield, an analyst at investment bank Baird, explained that 'reflation' trades are emerging. Reflation trades refer to an investment strategy where investors buy stocks fearing bond prices will fall due to inflation concerns triggered by expansionary fiscal policies. President-elect Biden has repeatedly emphasized his plan to distribute $2,000 in cash to all citizens immediately after his inauguration on the 20th of this month, a factor that could stimulate inflation. This explains the buying spree in semiconductors, banks, and consumer goods.

The Biden administration's focus on green policies is also fueling the stock market daily. Electric vehicle maker Tesla showed a strong surge, rising 7.94% on the day. Tesla's stock price surpassed $800 for the first time ever. After a 740% increase last year, Tesla's stock has continued its strong rally this year. Compared to Apple's modest 3% rise on the same day, Tesla's stock gain was even more remarkable.

[Image source=Reuters Yonhap News]

◆ Green Stocks Rally... Tesla Soars 8% = Tesla's stock price surge also changed the global wealth rankings. According to Bloomberg News, Elon Musk, Tesla's CEO, has a net worth of $195 billion, surpassing Jeff Bezos, Amazon's CEO, by $10 billion to claim the top spot in the wealth rankings. At the beginning of last year, Musk's net worth was only $27 billion, barely making the top 50, but thanks to the COVID-19 pandemic, strong earnings, and the U.S. administration change, he has grown his assets at the fastest pace in history.

Alongside the rise in the U.S. stock market, concerns about overheating are also growing. On the same day, Citigroup downgraded its investment rating on the U.S. stock market to 'neutral,' judging that further gains would be difficult. Citigroup noted that while the global stock market's price-to-earnings ratio is 20 times, the U.S. market stands at about 23 times, indicating overvaluation. However, Citigroup upgraded its rating on emerging markets to 'buy.'

'Bond King' Bill Gross also pointed out that there is a bubble in the stock market, specifically highlighting Tesla as overvalued. Bloomberg News noted the large gap between Tesla's stock price and its earnings, producing only 500,000 electric vehicles last year, but also acknowledged that the Democratic administration and Congress are supporting the electric vehicle era, which is driving the stock price higher.

This content was produced with the assistance of AI translation services.