After several months of continuous rise, the strong rise in US stocks seemed to come to an abrupt end in July: since the S&P 500 index hit a record high on July 16, the index began to fluctuate and decline. It has been falling continuously for four weeks on the weekly K-line chart. It has already accumulated a cumulative decline of more than 8%, and the cumulative decline of the NASDAQ 100 index is more than 10%.

And the seven major tech giants in the US stock market are also hard to escape. Apple $AAPL.US$ , Microsoft $MSFT.US$ , Nvidia $NVDA.US$ , Google $GOOGL.US$ , Amazon $AMZN.US$ , Meta $META.US$ , Tesla $TSLA.US$ They all showed varying degrees of correction.

What are the valuations of the top 7 tech giants after sharp fluctuations in US stocks? Has the premium been cleared, is there any potential to bottom out, or will it continue to fall? These have all become the focus of investors' current attention.

According to Bloomberg data, the dynamic price-earnings ratio of more than half of the Big 7 companies, namely Tesla, Nvidia, Amazon, and Google, is lower than the average for the past 5 years. Meanwhile, the dynamic price-earnings ratios of Microsoft, Apple, and Meta have also fallen back to close to the average of the past five years.

*The dynamic price-earnings ratio (Forward P/E) is calculated using expected US stock earnings and is usually used to estimate the company's future valuation. When the dynamic price-earnings ratio is lower than the average price-earnings ratio over the past 5 years, it is generally regarded as a positive sign.

Man Group, a famous British hedge fund, explained in a recently released report that after last week's sell-off, the valuations of the Big Seven US technology stocks have returned to a level where their valuations can be justified.

The company said that the recent sell-off caused the NASDAQ and S&P 500 indices to record their worst single-day performance in many years, and has now lowered the valuation of the “Seven Sisters” to a “more reasonable level” in early 2024.

According to Man Group's analysis, the current valuation of the US stock “Seven Sisters” can basically create relatively moderate and achievable “mid-single digit returns” over the next ten years.

Is the worst over?

According to market opinion, although there are various reasons for the sharp decline in the market this time, and there are many opinions, at the end of the day, the most important point is that the speculation is too high. So much so that as soon as there is a slight wind movement, a pullback will be triggered.

Last year was also around this time. After reaching a new high during the year, the US stock index turned to adjustments, rising and falling, and had quite a few twists and turns. It wasn't until the end of October, after the Federal Reserve switched pigeons, that it started rising again.

Looking back at the last market adjustment, over a period of three full months, the S&P 500 index fell 10% and the Nasdaq Composite Index fell 13%. If predicted based on historical experience, the current pullback has not reached the level of the previous one in terms of time span or adjustment range.

From the perspective of steady investment, the market is likely to go through a long period of adjustment. Considering the significant gains in the stock market in the first half of this year, a long adjustment period will help the market absorb these gains, which is logically reasonable. Of course, it would be more ideal if the market could adjust and resume the upward trend as quickly as in April of this year.

In fact, the market correction itself is a positive phenomenon; it is one of the key factors for US stocks to maintain a long-term bullish market. By eliminating excessive bubbles in a timely manner, the market can continue to develop in a healthier and more stable manner, thus bringing real benefits to investors.

What else needs to be paid attention to in the future market?

The US election and the Federal Reserve's interest rate policy are undoubtedly important reasons affecting subsequent trends.

Currently, the US election is becoming more and more “confusing.” As Harris relentlessly pursues various polls, it is difficult for Trump to decide whether to win or lose his chances until now.

According to Polymarket's latest forecast market data, current Vice President Harris and former President Trump both have a 49% chance of winning the 2024 US presidential election.

As Harris joined the campaign, Trump's chances of winning declined, and Trump's deal was liquidated. Markets don't like uncertainty, so as Trump's chances of winning decrease, competition becomes more intense and macro-risk appetite weakens.

Many institutions believe that the Federal Reserve will start cutting interest rates in September. Next, before the Federal Reserve's September monetary policy meeting, the release of data such as July CPI, August's non-agricultural, and August CPI will further confirm the expectations and pace of the Fed's interest rate cuts.

At the same time, the market believes that the Fed's interest rate cut implied a sign of “recession,” and began to continue to pay attention to whether the risk of a recession in the US economy escalates.

Under this series of expectations, capital began to act early and triggered price fluctuations in the capital market. Tianfeng Securities believes that the current time for the Federal Reserve to cut interest rates may continue to approach, and the subsequent trend of various types of assets mainly depends on whether the US economy is going into recession. It should be noted that the volatility of risky assets may have increased, and the contraction and reversal of global political trends and arbitrage transactions may be one of the important current risk points.

Furthermore, the performance of US stocks is also an important focus. However, since 6 of the 7 giants have already announced financial reports, the market has also fallen quite a bit, which has absorbed the overvaluation to a certain extent. There's Nvidia left. Of course, this is also the most important one, whether it's about Nvidia itself, but also about the entire AI industry chain. If Nvidia misses its earnings report at the end of the month, then NASDAQ will still plummet.

Of course, there are also geopolitical issues. Investors continue to pay attention to developments in the Middle East. After the assassination of senior Hamas leaders in Tehran last week, Iran has drawn attention to what kind of retaliatory attacks Iran will launch against Israel, which will also affect the market's risk appetite.

Editor/Somer