The Zhitong Finance app learned that as of Friday's US stock market closing, the Nasdaq 100 Index (Nasdaq 100 Index), which has the title of “global technology stock trendsetter”, hit a record high closing point. The increase from 2023 to date has reached an astonishing 52%, far above the technical bull market threshold of 20%, and is even expected to become the best year since 2009. In the week that the Nasdaq 100 index, which covers large technology stocks such as Apple, Microsoft, and Google, hit a new high, the Federal Reserve unexpectedly “released a dove”: that is, the sharp interest rate hike to contain inflation has come to an end, and the 2024 interest rate cut is on the table.

As of Friday's US stock market close, the Nasdaq 100 index rose 0.52% to 16623.45 points, surpassing the peak closing point of 16573.34 points set by the close of trading in November 2021. Since January, the risk On (risk chasing) momentum in the US stock market can be described as only increasing and not decreasing. The index is expected to record the most rapid growth year since 2009. According to data compiled by institutions, “junk bond ETFs” in the US stock market have seen an unprecedented capital inflow of more than 15 billion US dollars in the past six weeks, reflecting that investors' Risk On strength has only increased unabated, and market risk appetite has increased dramatically.

Since January of this year, the Nasdaq 100 Index, which covers the most popular technology stocks in the US, has been rising almost continuously. After experiencing poor performance in 2022, the index can be described as “making great strides along the way” in 2023, aided by the global AI boom, forcing global investors to catch up. The Nasdaq 100 index recorded the best first half performance in US stock history in the first half of the year. In November, the index recorded an increase of about 11%, the highest monthly increase since July 2022. This week, the Federal Reserve unexpectedly expressed a dovish stance, stressing that the interest rate hike cycle has basically ended, and has begun discussions on the timing of interest rate cuts. Risk On momentum has further strengthened.

The last time the Nasdaq 100 index reached a record high was shortly after Federal Reserve Chairman Jerome Powell (Jerome Powell) used the term “temporary” when describing the US inflation rate. However, the Fed's policy makers spared no cost to control price pressure, causing US stocks, and even global stock markets, to fall across the board over the next year. The impact on the Nasdaq 100 Index, which is dominated by technology stocks, was particularly severe. At one point, the index lost about one-third of its total market value.

The “epic rebound” of US technology stocks this year was inseparable from the global AI boom. Spurred by the generative AI trend among global companies, investors have high expectations for the technology industry. This AI boom has directly contributed to the cumulative three-digit gains of the seven largest US tech giants (Magnificent Seven). The seven tech giants (Magnificent Seven) in the US stock market include: Apple, Microsoft, Google, Tesla, Nvidia, Amazon, and Meta Platforms.

This week, bulls in the US stock market are extremely optimistic that the latest “FOMC bitmap” released by the Federal Reserve shows that compared with the September bitmap, the pace of interest rate cuts by the Fed in 2024 will be faster, and may even be faster than the 75 basis point rate cut suggested by the latest bitmap, so the power of speculation about “interest rate cuts” will continue to support the rise in US stocks.

The median estimate of the latest FOMC bitmap shows that the Fed may cut interest rates at least three times in 2024, by 25 basis points each time, which is far more aggressive than the expectations of Fed officials in September, and higher than the 50 basis points of interest rate cuts expected by economists recently surveyed by Bloomberg. However, market expectations for interest rate cuts are even more aggressive. The interest rate futures market bets that the Fed will cut interest rates by as much as 150 basis points next year.

“Technology stocks remain the leader in the US stock market,” said Mary Ann Bartels, chief investment strategist from Sanctuary Wealth. “Artificial intelligence will revolutionize productivity growth. Despite the good performance of technology companies, their profitability has just begun to rise moderately, so as long as we remain in an environment where profits are scarce, technology stocks may continue to surpass those value stocks next year.”

It is worth mentioning that the Nasdaq 100 Index is actually not unfamiliar with the “failure to set a new record for a long time” — over 15 years after the dot-com bubble burst (dot-com bust), the index failed to successfully break previous records.

Next year's Nasdaq 100 Index “keep playing music and dancing”?

As of December 13, AAII's latest survey data shows that the much-publicized US retail stock market bullish confidence index has risen rapidly to more than 50%. The proportion of retail investors who are bullish on the trend of US stocks for the next six months or so surged compared to mid-November, and the bullish ratio is far higher than the historical average.

“The general environment of declining benchmark interest rates has provided tremendous support for the Nasdaq 100 Index, which has long-term investment properties.” Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas, Texas, said. “If you look at the fundamentals of the index, you'll see that the fundamentals of major technology companies and other companies in the index are strong, which should support the index's further upward trend.”

Michael O'Rourke, chief market strategist at JoneStrading, even said, “The market has gone too far and too fast. The Fed's instantaneous reversal of the dovish stance may trigger surrender buying power.”

Wedbush, a well-known Wall Street investment agency, recently released a report saying that even after achieving an “epic rebound” this year, US technology stocks as a whole are expected to rise by at least 20% in 2024. The agency expects that with the continuous expansion of artificial intelligence (AI) application scenarios starting next year, spending on artificial intelligence and cloud computing will increase dramatically next year, and the global technology industry will show a prosperous development trend.

Wedbush insists on comparing the impact of artificial intelligence on commercial applications and technology to the Internet. The agency's analysts say that artificial intelligence is in the “1995 moment” (the beginning of the Internet's blowout development). Senior Wedbush analysts led by Dan Ives (Dan Ives) wrote in a report: “We believe artificial intelligence is the most transformative technology trend since the Internet system was officially launched in 1995. We believe that many Wall Street analysts still underestimate the size of AI spending over the next 10 years, and we expect it to reach $1 trillion.

The agency said: “Based on our recent survey data in this area, the fundamental expectations of growth technology companies are rock solid.” “A new tech bull market can be said to have begun. Technology stocks are ready for strong performance in 2024. As the wave of artificial intelligence spending hits the broader tech industry, we expect the US tech stock benchmark, the Nasdaq 100 Index, to soar by more than 20% next year, led by major technology companies.”

Editor/Somer