Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.

The rising trend that is driving the US stock market to historic highs depends more and more on$NVIDIA (NVDA.US)$Nvidia and other large-cap stocks, which once again raises concerns that the overall market performance has become tied to some companies.

Market cap surges! NVIDIA impressed the crowd.

Thanks to its dominance in the field of artificial intelligence chips, NVIDIA's stock price has been steadily rising this year. On Wednesday, the company's market cap broke through $3 trillion, surpassing Apple to become the world's second-largest company by market cap, second only to Microsoft.

This milestone performance also drove up several ETFs with higher positions in NVIDIA. Data shows that the top 10 ETFs with the largest positions in NVIDIA all rose on Wednesday.

Data shows that in the past 32 trading days, NVIDIA's market cap has increased by over $1 trillion, a six-week increase that has exceeded the total market cap of Berkshire Hathaway, which 'stock god' Warren Buffett spent 60 years building. And from the low point in October 2022 to now, NVIDIA's stock price has risen almost 1000%!

Strong demand has led to NVIDIA's 'explosive' financial reports and performance guidelines. In the first quarter, the company achieved revenue of $26 billion, a year-on-year increase of 262%. Among them, the revenue of the datacenter business was $22.6 billion, a year-on-year increase of 427%. Net income in the first quarter rocketed 628% year on year to $14.81 billion. At the same time, NVIDIA expects revenue in the second quarter to be $28 billion (+/- 2%), higher than analyst expectations of $26.8 billion. NVIDIA CEO Huang Renxun also said the company is preparing for the 'next wave of growth' with the launch of the next-generation Blackwell architecture chip.

Since Nvidia released its first quarter results, the stock has risen by 29%, while during the same period, it has only risen by 0.9%. Michael O'Rourke, Chief Market Strategist at JonesTrading, said Nvidia is supporting this uptrend. But he also warned that this is a risk and if the stock experiences a pullback, investors will intuitively feel it in the market. $S&P 500 Index (.SPX.US)$Data from S&P Dow Jones Indices shows that the S&P 500 index has risen more than 12% this year, of which about 60% of the gains have been driven by five companies with greater weight in the index, namely Nvidia, other large-cap stocks and other names. Among them, Nvidia has risen by 147% so far this year alone, contributing about one-third of the S&P 500's gains this year.

It is worth mentioning that NVIDIA will implement a 1-for-10 stock split plan after Friday's close. Although stock splits do not change the company's market cap, they are usually interpreted as a bullish signal. The market generally believes that stock splits show management's confidence in the company's future growth and stock price, so this may boost the stock price in the short term.

Market breadth raises concerns about fragility. How much longer can the U.S. stock market rise?

S&P Dow Jones Indices data shows that the S&P 500 index has risen more than 12% this year, of which about 60% of the gains have been driven by five companies with greater weight in the index, namely Nvidia and other large-cap stocks. $Microsoft (MSFT.US)$, $Meta Platforms (META.US)$, $Alphabet-A (GOOGL.US)$ and $Amazon (AMZN.US)$Among them, Nvidia has risen by 147% so far this year alone, contributing about one-third of the S&P 500's gains this year.

As the stock prices of these large companies rise, their weightings in the S&P 500 index are also increasing, which in turn gives them greater influence on the overall index. According to data from Bianco Research, as of the end of May, the top four stocks by market cap in the S&P 500 index, namely Microsoft, Apple, NVIDIA, and Alphabet, accounted for nearly 24% of the index, the highest level in 60 years.

Many investors believe that considering these companies' strong earnings, dominant market positions, and expectations that they will leverage the advances in the emerging field of artificial intelligence, their market influence is well-deserved. However, some investors are concerned that if these large companies begin to experience volatility, the phenomenon of concentration of gains in a few large companies could threaten the entire stock index.

Angelo Kourkafas, senior investment strategist at Edward Jones, said, 'If these stocks perform poorly, and we don't see the other parts of the market providing that support, it could be a potential vulnerability.'

According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, an analysis of the top 10 constituent stocks in the S&P 500 index shows that their weighting rose to 34.1% at the end of May, the highest level in history.

In recent years, concerns about market breadth have repeatedly arisen. The S&P 500 index rose 24% in 2023, with most of the gains driven by the "Seven Giants of US Stocks". The reason was that at the time, concerns about economic recession attracted investors to turn to large companies that were less affected by economic fluctuations. The "Seven Giants of US Stocks" performed well in 2023. Although there was no economic recession, most of the other stocks in the US stock market still performed tepidly.

There were signs of an expansion in market breadth in the first quarter of this year when the financial, energy, and industrial sectors all outperformed the S&P 500 index. However, when the market rose in the second quarter, these sectors performed poorly. In addition, the equal-weighted S&P 500 index has narrowed its gains to 4.5% this year, compared to the S&P 500 index, which has risen 12% this year.

Global market strategist Jack Manley of JPMorgan Asset Management says, "We're all excited about the broadening of the recovery, but it seems to have stalled out, at least for the first half of this year." Analysts have cited some reasons for the narrowing of market breadth, including the profit advantage of large tech companies in the first quarter and investors' enthusiasm for companies benefiting from AI. Concerns about a slowing economy - reflected in recent data, such as the weakening of US manufacturing data - may be another factor.

Some investors believe that this concentration only reflects the economic strength of these large companies and is not worth worrying about. Peter Tuz, president of the investment consulting firm Chase Investment Counsel, says that large companies perform well because their performance and prospects are strong. However, he also adds that it is usually better for stocks in more diverse categories to rise, as this reflects the overall strength of the economy.

Others are optimistic that the stock market will once again expand in the coming months driven by improvements in performance of other companies in the S&P 500 index. Tajinder Dhillon, a senior research analyst at the London Stock Exchange Group (LSEG), says that the earnings of the "Seven Giants of US Stocks" are expected to increase by 27% in 2024, while the earnings growth of the S&P 500 index component stocks excluding these seven companies is expected to be 7.4%. However, over time, this gap will gradually narrow. Angelo Kourkafas also believes that the gap in earnings growth will begin to narrow and that "investors should not give up on the theme of expanding market breadth."

Editor / jayden