After a mixed performance at the start of the trading week, stocks across key Asian markets turned green with Australia’s ASX 200 and South Korea’s KOSPI outperforming their peers and gaining 1.7% and 1.5% respectively. European benchmarks are also expected to start the week on a positive note, while the three main Wall Street indices are all indicating a green start.

President Trump’s executive orders to ban the use of WeChat and TikTok by mid-September did little to curb investor’s appetite to risk. Similarly, the announcement of a fresh round of sanctions on 11 individual Chinese and Hong Kong officials, including leader Carrie Lam, has not hurt sentiment. Losses were limited to China’s giant Tech firms Tencent and Alibaba.

US investors did not see these actions as harmful to the latest surge in equity prices, at least not yet. Chinese authorities have not responded on how or whether they will retaliate, but we will probably get to know later this week when senior officials from both countries review the implementation of the Phase 1 trade deal.

Investors are also keeping a close eye on Washington, after the collapse of negotiations on new stimulus measures led President Trump to sign executive orders aimed to extend Covid-19 economic support including unemployment benefits, payroll tax holidays and suspending student loan payments. This move seemed more of a tactical one to force Democrats to return to negotiations and it’s likely to work.

Looking through all this background noise, most economic data continues to beat economist forecasts with the latest non-farm payrolls report adding almost 1.8 million jobs and dragging the unemployment rate lower to 10.2% from 11.1%. The improvement in economic data by itself is not enough to justify the near record high levels in the S&P 500 especially as economic activity is nowhere near pre-Covid era levels, but when combining it with near zero interest rates, floods of liquidity through monetary policies and continuous fiscal stimulus, it does make sense. This should continue as long as valuations remain reasonable but given a P/E ratio of 36.4 on the Nasdaq 100, it does seem somewhat extreme and should be concerning for the Tech sector. In such a market environment, few analysts dare to call market tops, especially when many investors believe that Tech is the solution for all our problems and want to continue participating in this bull market. However, it is becoming more critical to hedge at least a portion of investor’s portfolios and certainly those heavily weighted towards Tech and FANGS in particular.