Bank of America strategist Michael Hartnett and his team recently pointed out that until real interest rates rise and concerns about the recession, the US stock market may continue to rely on a few large stocks to guide the market direction. They mentioned in their report that the United States$S&P 500 Index (.SPX.US)$The share of the top ten stocks in market capitalization has reached an all-time high of 34%, and globally, the share of the top ten stocks in the MSCI Global Index market value has also reached a record level of 23%.

The strategists mentioned above expect this concentration of stocks to continue until the actual yield on 10-year treasury bonds rises to around 3%, or until higher yields combined with larger credit spreads pose a threat to the recession. According to our understanding, a rise in real yields usually indicates a tense state in the financial market and is a typical sign of the bursting of the stock market bubble.

Although the market continued to fluctuate in April, since the beginning of the year, including$NVIDIA (NVDA.US)$,$Apple (AAPL.US)$und$Amazon (AMZN.US)$There is still a significant difference in performance between the “seven major US tech giants” and other companies in the market.$Microsoft (MSFT.US)$und$Alphabet-A (GOOGL.US)$Strong earnings reports released on Thursday are expected to further boost tech stocks. Alphabet's market capitalization is expected to break the historic mark of $2 trillion if it maintains its pre-market rise on Friday.

Overall, despite strong market performance in the first quarter, the stock market fluctuated again as traders reduced their bets on the Fed's interest rate cut during the year and commodity prices rose due to the Middle East conflict, which increased concerns about inflation. Despite this, even at$U.S. 10-Year Treasury Notes Yield (US10Y.BD)$It climbed to a six-month high of more than 4.70%, and the stock market still showed resilience against the backdrop of economic data showing a strong economy.

Bank of America strategists described the current state of the market as “unable to land,” meaning that interest rates are likely to remain high for a long time despite strong economic growth. They also added that this is beneficial for risky assets, especially cyclical assets.

However, they also warned that the risk of accelerated inflation may have a negative impact on risky assets and cause market fluctuations, which will benefit investments in cash, gold, and commodities.

Editor/Jeffrey