Source: Wall Street See
The gradually dimming expectations of interest rate cuts in the past six months have had no impact on the strong performance of US stocks.
As of the close on June 28, 2024,$S&P 500 Index (.SPX.US)$the cumulative increase in the first half of the year was 14%, slightly lower than the performance in the first half of 2023, but still one of the strongest half-year performance since the millennium Internet bubble.
The key support for the rise of US stocks lies in the AI trend. In the first half of the year, nearly 60% of the rise in US stocks was contributed by only five technology giants, including$NVIDIA (NVDA.US)$, $Microsoft (MSFT.US)$, $Amazon (AMZN.US)$, $Meta Platforms (META.US)$ and $Apple (AAPL.US)$among which the rise of only Nvidia contributed as much as 31%.
The concentration of the rise has become increasingly evident recently. In the second quarter, the top three companies, Nvidia, Apple and Microsoft, contributed more than 90% of the rise in the large-cap sector.
As the S&P 500 Index adopts market cap weighting, the fluctuation of the giants' stock prices has a huge influence on the overall index, covering up the weak performance of other component stocks. Calculated in equal weight, the S&P 500 index can only rise by 4% this year, and there may even be a decline in the second quarter.
However, Kevin Gordon, a senior investment strategist at Charles Schwab, believes that although it is not uncommon for large-cap giants to contribute a majority of the rise in an index throughout history, it is a warning signal when other parts of the market are performing poorly.
However, Denise Chisholm, Fidelity's director of market strategy and research, does not agree. She told the media that although the market concentration is now the highest in at least 20 years, many investors believe that the high concentration of the stock market at present is similar to the Internet bubble and is essentially unstable. But she thinks there have been several periods in the past when the market remained highly concentrated for a long time. And she pointed out that historically, a high concentration of the stock market is not necessarily a bad thing.
Some investors hope that similar to the scenario in the fourth quarter of last year, the underperforming sectors will eventually catch up and technology stocks will not see a correction.
Andrew Slimmon, senior investment portfolio manager at Morgan Stanley, told the media:
AI has already sucked up all the oxygen... its exposure is so high that other areas are forgotten. I think there are many companies with good performance in industries such as industry and finance, but they are overlooked.
He is optimistic about the upcoming second-quarter earnings season, believing that this will help draw investors' attention to fundamentally sound companies.
Editor / jayden