David Kelly from JPMorgan Asset Management said that large technology giants could continue to have a huge impact on the US stock market, and it is expected that only a 'bear market shock' could disrupt the dominance of technology giants in the US stock market. Here, 'bear market shock' refers to the major market crash that investors experienced in 2022. The chief global market strategist for this institution is one of the top strategists on Wall Street, and he expects earnings growth trends and stock price gains to expand beyond large technology giants by the end of the year. However, in the strategist's view, this may not be enough to narrow the huge performance gap between the 'Magnificent 7' of US technology giants and benchmark stock indexes outside of these stocks. Kelly said that this means that market sentiment needs to be extremely hit to stop cash inflows from leading the surge in the US stock market by large technology companies from 2023 to 2024. Kelly's asset management department at JPMorgan manages about $3 trillion in assets. Kelly pointed out that one of the extreme hits was two years ago when technology giants were smashed by the Federal Reserve's aggressive monetary tightening policy, and at that time, the 'Magnificent 7' fell far more than the US stock market - the S&P 500 index. Kelly said in an interview: 'When you welcome the next bear market, I think the stocks with the highest gains will suffer the most serious blow, just like in 2022.' 'Market sentiment must be hit in order to disrupt the pattern of how we currently see people allocate funds.'$NVIDIA (NVDA.US)$, $Apple (AAPL.US)$with$Microsoft (MSFT.US)$The dominance of large technology giants in the rise and fall of the US stock market may continue, and it is expected that only a 'bear market shock' can change the situation. This 'bear market shock' refers to a major market crash that investors experienced in 2022.

Please use your JPMorgan Asset Management account to access the feature.$S&P 500 Index (.SPX.US)$The earnings growth trends and stock price gains of large technology giants are expected to expand beyond the end of the year. However, in the strategist's view, this may not be enough to narrow the huge performance gap between the 'Magnificent 7' of US technology giants and benchmark stock indexes outside of these stocks.

Kelly said that market sentiment needs to be extremely hit to stop cash inflows from leading the surge in the US stock market by large technology companies from 2023 to 2024.

Kelly said in an interview: 'When you welcome the next bear market, I think the stocks with the highest gains will suffer the most serious blow, just like in 2022.' 'Market sentiment must be hit in order to disrupt the pattern of how we currently see people allocate funds.'

Large technology giants have been at the top of the US stock market in recent years, but their control has never been as strong as it is now. Institutional data shows that the equal-weighted version of the S&P 500 index, which almost indiscriminately includes all component stocks such as Nvidia, Microsoft, Macy's, etc., has lagged behind the weighted version of the S&P 500 index by about 10 percentage points, setting the largest performance gap in the first half of the year since statistics have been recorded.$Macy's (M.US)$'Magnificent 7' includes Apple, Microsoft, Google,

It is worth noting that the S&P 500 index calculated by total market value weighting is the most mainstream calculation method for most ETFs on the market and is currently the most popular benchmark for the S&P 500 index. According to the total market value weighting, the 'Magnificent 7' occupies a high weight of more than 30%.

However, some forecasters have begun to believe that the expected slowdown in profit growth of large technology stocks will be general, while the profits of other S&P 500 index components companies will accelerate. Strategists from Morgan Stanley and Bank of America and other institutions state that this shift will help boost other sectors of the US stock market.

Kelly predicted that the narrowing of the performance gap between various sectors and the profits of tech giants will not be enough to weaken people's investment enthusiasm for artificial intelligence in the short term. Of course, considering that the valuation of large technology companies is already too high, he does recommend that long-term investors look for investment opportunities outside of large technology stocks.

'Magnificent 7' includes: Apple, Microsoft, Google, $Tesla (TSLA.US)$, 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.

Using the S&P 500 Information Technology Index as an example - the information technology sector covers most tech companies - the P/E ratio of the index was as high as 31x in June, while the P/E ratio of the entire S&P 500 index was 21x. Data compiled by institutions shows that this gap is the largest since 2003.

"I think what's driving the market is this momentum psychology." Kelly said. "When investors generally have a specific investment theme, it seems that only a few core names will attract cash - slow changes in income distribution will not really cause a trend change in the market or investor psychology."

Currently, there is almost no sign that this momentum to support large tech giants will weaken. Investors are generally betting on a soft landing of the US economy, strong economic data, interest rate cuts by the Federal Reserve, and inflation slowing down. Kelly said that this is a 'boring' background, and added: 'But a boring background is very beneficial to the market.'

Edited by Jeffrey