For American stock investors, this is the best of times if they buy stocks like technology, and the worst of times if they don't buy stocks like Nvidia and other technologies.$NVIDIA (NVDA.US)$In terms of indexes, the Russell 2000 has fallen 17% from its 2021 high point, and has fallen about 0.5% since the beginning of the year, while the S&P 500 index continues to hit historic highs. On the individual stock side, since early 2022, more than half of the S&P 500 index components have fallen. The S&P 500 index has set new intraday highs in 11 of the past 13 trading days, but only 198 stocks have risen this month.

The "wealth gap" in the US stock market is not only reflected among indexes, but also among individual stocks.

Even among the few technology stocks that support the market, there has been a differentiation. Nvidia contributed to more than 30% of the increase in the S&P 500 index this month before the pullback on Thursday. Apple's increase since the beginning of the year is less than 10%, while Tesla has fallen 26.93% since the beginning of the year. According to tradition, a bull market defined by Wall Street is a wide-ranging rally, rather than a highly concentrated structural bull market. The current market conditions indicate that two different factors are driving the stock market: demand for chips that drive artificial intelligence and concerns about the economy and interest rates.

Even among a few technology stocks that support the market, there has been a differentiation. Nvidia contributed to over 30% of the increase in the S&P 500 index this month before the pullback on Thursday. Apple's increase since the beginning of the year is less than 10%, while Tesla has fallen 26.93% since the beginning of the year.

According to tradition, a bull market defined by Wall Street is a wide-ranging rally, rather than a highly concentrated structural bull market. The current market conditions indicate that two different factors are driving the stock market: demand for chips that drive artificial intelligence and concerns about the economy and interest rates.

The first force drives technology stocks like Nvidia, Microsoft, and indexes with higher technology weights such as the S&P 500 index to new highs, making Nvidia the world's most valuable company with a market cap larger than the value of the UK stock market combined. The second force has pushed most stocks lower as weak data reduces expectations for economic growth, while the Fed continues to worry about inflation and maintain higher interest rates.

Investors buy ETFs to spread their exposure across multiple companies. However, in actuality, due to the weighting design of the index, investors are only increasing their risk exposure to Nvidia, as well as broader artificial intelligence risks.

Now the issue is that investors are increasingly concerned about economic growth and worried that the Fed's rate cuts are not fast enough. Bond yields have been falling, and the two-year US Treasury bond yield, which is sensitive to interest rates, has fallen from over 4.7% at the end of April to 4.26%. But traders have almost given up on their expectations for rate cuts in the next month and in September, as Fed officials warn that they need more evidence to prove that inflation is moving towards the 2% target.

The average price of stocks has not been boosted by falling bond yields; in fact, it has fallen alongside lower bond yields. Even small investors in the Russell 2000 index have not benefited from this trend, as the index components tend to have more debt and are therefore more sensitive to changes in yields.

At a time when high interest rates have already hurt low-income consumers and smaller, weaker companies, the outlook is not optimistic for investors if the economy is weak and there are not many rate cuts.

High-flying tech stocks are the pride and joy of the US market. The risks are obvious, but very few people are really bearish because they are too concentrated and have been soaring for too long.

Will the US stock market continue to rise in the future? Yes, it will. After all, Tesla has yet to rise this year, and even if Nvidia's rise has paused, it's difficult to judge whether other tech giants will take up the baton. As Dickens said, this is "the epoch of belief, it was the epoch of incredulity."

Edited by Jeffrey