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%.

$S&P 500 Index (.SPX.US)$In the first half of this year, the S&P 500 index hit new highs several times, rising more than 10% in the first quarter and nearly 4% in the second quarter. The main catalyst for this year's benchmark stock index was the global investment frenzy around artificial intelligence in the US stock market. Stocks such as AI chip companies and large technology stocks that benefit from AI have surged, driving the S&P 500 index higher, even though most of the constituent stocks of the index fell in the first half of the year.$NVIDIA (NVDA.US)$and other chip stocks$Apple (AAPL.US)$, $Microsoft (MSFT.US)$However, as the stock market enters the second half of the year, more and more Wall Street analysts are worried that the breadth of the market is still too narrow, that chip stocks such as NVIDIA are expanding overly and may trigger the collapse of the "AI bubble" and that the overall rise of the S&P 500 index is overly dependent on large technology stocks that occupy a high proportion of the index. At a more macro level, the main challenge that the S&P 500 index may face in the second half of this year is that the pace of US economic growth slows significantly, and multiple adverse factors such as the significant downward revision of overall EPS expectations for US companies may occur as a result.

According to the research reports they recently published, their main concern is that if macroeconomic factors lead large technology companies to fail to meet the extremely optimistic expectations of the market for their overall performance, these high-weighted technology stocks may lead the S&P 500 index into a significant correction phase.

Therefore, even under the vigorous promotion of large-cap tech stocks such as Nvidia, Google, and Microsoft, the US stock market has just ended a strong second quarter, which still prompts more and more Wall Street analysts to be more cautious about the US stock market in the second half of this year.

The latest statistical data shows that the slowdown in US economic growth is confirmed in every corner of the US economy. Revised economic data released last Thursday showed that the core engine of the US economy, personal consumption expenditures, fell 0.5 percentage points from its initial value in the first quarter, with the final annualized quarterly rate value being only 1.5%.

Other revised data shows that every corner of the US economy is showing a slowdown in economic growth, such as the decline in certain commercial equipment orders and shipments, the largest trade deficit in two years, signs of weakness in the job market, and a comprehensive decline in home sales.

The core catalyst for the new high of the S&P 500 index: the magnificent seven~ the seven major technology giants in the US stock market.

The following set of data can be described as a sharp contrast: the total market value-weighted S&P 500 index, which is also the S&P 500 index tracked by most ETFs, rose 4% in the second quarter and closed at a historical high for nine times. However, the equally weighted version of the S&P 500 index~ that is, the weights of NVIDIA, Google, and Microsoft in the index are the same~ unexpectedly fell 3.1% from their historical high at the end of the first quarter.

The huge difference in the performance between the indexes with different weights can largely be attributed to the unprecedented AI investment boom since 2023. This AI investment frenzy has driven the stock price of AI chip giant NVIDIA, which is also a consumer electronics giant like Apple, up by 150% this year since the core driving force behind the rebound of its share price in the first quarter slump is the release of iPhone artificial intelligence features based on Apple Intelligence.

As we enter the second half of 2024, the seven major technology giants in the US stock market~ the Magnificent 7~ have a total market value of more than $10 trillion, which is the highest weight of these companies that makes the seemingly tepid US stock market so hot.

So far, the factors that have driven the rise of the S&P 500 index and the expansion of overall EPS expectations have not changed significantly and are still led by the "Magnificent 7" of NVIDIA and Microsoft. Additionally, Goldman Sachs, Wells Fargo & Co, and Deutsche Bank, bullish analysts of the US stock market, insist that this year's rebound in the US stock market will be driven by the continued rebound trend of enterprise profit data under the leadership of technology giants. They expect that until the end of 2024, the strong performance data of the Magnificent 7 will continue to drive the overall EPS expansion and the trend of the S&P 500 index to continue to reach new highs.

The Magnificent 7 include Apple, Microsoft,

Global investors have flocked to these seven technology giants in 2023 and the first half of 2024. The main reason is that they are betting that, due to the large market size and financial strength of these technology giants, they are in the best position to use AI technology to expand their revenue.$Alphabet-A (GOOGL.US)$/$Alphabet-C (GOOG.US)$, $Tesla (TSLA.US)$, Nvidia, and meta platforms.$Amazon (AMZN.US)$and $Meta Platforms (META.US)$Global investors continue to flock to the seven major technology giants in 2023 and the first half of 2024, primarily because they are betting on the best possible position to use artificial intelligence technology to expand revenue due to the huge market size and financial strength of these technology giants.

Artificial intelligence boosts semiconductor stocks - but it's not just about chip stocks.

Among the 11 sectors of the S&P 500 index, only three sub-sectors had better or equal performance to the benchmark in the second quarter, reflecting the market's narrow sector width. The three sub-sectors were: information technology (up 13.6%), communications services (up 9.1%), and utilities (up 3.9%). Only 25% of the constituent stocks in the S&P 500 index performed better than the index itself.

Even within the technology sector, there are significant differences between winners and losers in the second quarter: only the semiconductor industry outperformed the S&P 500 index in the technology industry that makes up this sector, indicating that the semiconductor industry is currently the largest beneficiary of the global frenzy for AI investment. The share price of NVIDIA, the strongest king in the AI chip field, continued to soar and became the world's highest market cap listed company. Meanwhile, giants focused on Ethernet switch chips and AI ASIC chips,

also saw their share prices soar in the first half of the year as the construction boom in AI infrastructure significantly boosted their sales, while SAP, once seen as a big winner in the AI frenzy, saw its stock price drop by 3% in the second quarter. The logic behind this is that the software industry still needs to spend a lot of money on basic equipment such as NVIDIA AI GPU and Ethernet infrastructure, and it is currently difficult to make profits from AI products. In early June, the stock price of cloud software giant$Broadcom (AVGO.US)$plummeted due to poor sales and performance guidance. Small software companies like Shopify and MongoDB also suffered significant drops in their stock prices due to disappointing performance.$Qualcomm (QCOM.US)$However, cloud computing giant saw its stock price soar in the software industry, not because of its outstanding performance - its revenue and profit did not meet market expectations - but because it announced cloud computing partnerships with Microsoft and OpenAI, the leaders in the AI field.

It is worth noting that investors are so interested in the AI theme that they are looking beyond chip companies for "shovel" type winners of the AI revolution. The stock that performs second only to NVIDIA in the S&P 500 index is American clean energy leader , whose stock received a boost in early May and analysts call it a potential beneficiary of AI - after all, under the global decarbonization trend, clean energy may become the most critical power supply for AI data centers. $Salesforce (CRM.US)$Specifically, among the strong-performing utility sectors, the strongest-rising categories are concentrated in electrical utilities and renewable energy stocks. The main logic behind this is that these two sub-sectors are seen as one of the biggest beneficiaries of the unprecedented frenzy of global corporate AI deployment, as the high-energy-consuming AI data centers that are expanding exponentially need the basic power supply behind them, which is the source of the market view that "the end of AI is electricity."$Shopify (SHOP.US)$, $Workday (WDAY.US)$ and $MongoDB (MDB.US)$and other small software companies also suffered significant drops in their stock prices due to disappointing performance.

Cloud computing giants stock soared in the software industry, but not due to outstanding performance - its revenue and profit did not meet market expectations - but because it announced cloud computing partnerships with Microsoft and OpenAI, the leaders in the AI field.$Oracle (ORCL.US)$It is worth noting that investors are so interested in the AI theme that they are looking beyond chip companies for "shovel" type winners of the AI revolution. The stock that performs second only to NVIDIA in the S&P 500 index is American clean energy leader , whose stock received a boost in early May and analysts call it a potential beneficiary of AI - after all, under the global decarbonization trend, clean energy may become the most critical power supply for AI data centers.

Specifically, among the strong-performing utility sectors, the strongest-rising categories are concentrated in electrical utilities and renewable energy stocks. The main logic behind this is that these two sub-sectors are seen as one of the biggest beneficiaries of the unprecedented frenzy of global corporate AI deployment, as the high-energy-consuming AI data centers that are expanding exponentially need the basic power supply behind them, which is the source of the market view that "the end of AI is electricity."$First Solar (FSLR.US)$The so-called winners of the AI revolution in addition to chip companies are attracting investors' attention. Stocks that performed only slightly worse than NVIDIA in the S&P 500 index include American clean energy leader , which received a boost in early May and analysts consider a potential beneficiary of AI - after all, under the global decarbonization trend, clean energy may become the most critical power supply for AI data centers.

Specifically, among the strongly performing utility sectors, the strongest-rising categories are concentrated in electrical utilities and renewable energy stocks. The main logic behind this is that these two sub-sectors are seen as one of the biggest beneficiaries of the unprecedented frenzy of global corporate AI deployment, as the high-energy-consuming AI data centers that are expanding exponentially need the basic power supply behind them, which is the source of the market view that "the end of AI is electricity."

Utilities stocks are usually a relatively quiet corner of the market, favored by low-risk preference investors and defense strategy investors for years, but their performance still resembles that of a high-growth sector. American electric power giant saw its stock price soar 80% in the first quarter and joined the S&P 500 index in May, becoming one of the leading stocks in the index. NRG Energy(NRG.US) and NextEra Energy(NEE.US) have both risen far more than the S&P 500 index this year.$Vistra Energy (VST.US)$Some analysts believe there are ominous signs beneath the surface.

However, beyond these sectors benefiting from the AI investment boom, the reality of the U.S. stock market in the second quarter and even the first half of the year is quite bleak.

However, outside of these sectors benefiting from the AI investment boom, the actual situation of the US stock market in the second quarter and even the first half of the year was quite bad.

Since March, energy, finance, medical, industrial, materials and real estate industries in the S&P 500 index have seen a sharp decline. About 60% of the components of the S&P 500 index showed a downward trend at the end of the whole second quarter. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.

The difference between the S&P 500 index and most of its constituent stocks was fully reflected in June. As Nvidia and other chip stocks, as well as large technology giants soared, the S&P 500 index repeatedly hit new highs. However, the proportion of the rise and fall ratio line of the S&P 500 index (representing the number of shares rising and falling) began to decline rapidly, which is a potential sign of problems.

"As of June 12, when the S&P 500 recorded its fifth closing historical record of the second quarter, only 34% of the S&P 500 constituent stocks closed above their short-term technical important indicators-20-day moving averages... the lowest percentage with a new high since 1990." LPL financial chief technical strategist Adam Turnquist said.

Investors should be cautious about the future direction of the US stock market.

Some Wall Street analysts believe that there is still more room for this round of bullishness in the US stock market, especially if the second-quarter financial reports are as strong as expected. These analysts who are bullish on the future market expect that only three sectors-main consumer goods, industrial and materials-may show a contraction in profits in the second quarter, and seven sectors are expected to have profit growth exceeding 5%. The evidence of continued corporate profit growth may help further expand the rise of the stock market.

History also seems to be on the side of the market bulls. According to a report released by LPL Financial last Thursday, if the S&P 500 index rises by 10% or more in the first half of the year, the probability of the S&P 500 index rising is over 80%, and the average increase in the second half of the year is close to 8%.

However, if these technology giants and important chip companies fail to meet the market's optimistic expectations, it may trigger a wave of declines. Strategist Marko Kolanovic of JPMorgan emphasized that the S&P 500 index may fall in the next few months as the economic growth slows down and the overall EPS of the US stock market, which is expected to be high, may be downgraded. Kolanovic and his team, chief market strategist of JPMorgan, stated in a mid-year outlook released last Friday that by the end of the year, the S&P 500 index is expected to fall to 4,200 points, a decrease of about 23% from the closing point of 5,483 points on Thursday. Kolanovic's view actually reiterated his prediction for more than a year, despite other Wall Street institutions raising their point forecasts for the S&P 500 index to keep up with the rapid rise of the market.

According to Peter Berezin, chief global strategist at BCA Research, the main reason for the US stock market's decline may be due to the accelerating slowdown in the labor market, which brings huge pressure on consumer spending and causes this driving force of US economic growth to slow down significantly. Berezin cited a series of economic data: the number of job openings in the United States has dropped significantly, and private enterprise layoffs have worsened. At the same time, non-farm data shows a significant slowdown in wage growth, and the recently released PCE price index also shows signs of weak consumption.

It is understood that in recent weeks, more and more Wall Street analysts have called on investors to remain cautious. They believe that this wave of long bullishness in the US stock market has not yet ended, but a period of adjustment in the second half of the year may be inevitable.

For example, Goldman Sachs, which is bullish on the S&P 500 index reaching 5600 by the end of the year, recently warned that factors such as the continuous expansion of the US fiscal deficit and excessive market concentration have increased the risk of a market correction, and now may be a good time to "brake". "This is a bull market, but the possibility of correction is increasing. Therefore, I recommend looking for opportunities to reduce overall portfolio risk to cope with the next stage of the political game." A report released by Goldman Sachs last week showed.

The constantly narrowing sectors are one of the important warning signals that analysts have sounded in recent weeks. Turnquist said: "The recent breakthroughs lack confirmation, but it does not mean that the bull market has ended, but it does increase the risk of suspending or adjusting, unless the number of rising sectors continues to expand."

Analysts from Piper Sandler made a similar evaluation report on Tuesday, stating that the US stock market is "likely" to experience a short-term callback. The institution's analysts pointed out that the upward momentum was weakening towards the end of last month, and defensive stocks quietly entered the best-performing stock lineup in the market, indicating that market preferences may tend to be conservative.

Piper Sandler's analysts also pointed out that the S&P 500 index is extremely concentrated in technology giants-Microsoft, Nvidia, and Apple have a cumulative market value four times that of the Russell 2000 small-cap stock index. And the excessive expansion of chip giants such as Nvidia and Broadcom is also worrying.

Editor / jayden