Except translation, this story has not been edited by achinews staff and is published from a syndicated feed.
Only a few big tech names have led this year’s stock market rally – but maybe that’s not such a bad thing.
Yahoo Finance’s Josh Schafer has the scoop:
“We see a small group of technology winners leading stock gains as a feature of the artificial intelligence (AI) theme — not a lack,” wrote Jean Boivin, head of BlackRock Investment Institute, in a research note on Monday. “We remain overweight in US stocks.”
AI darling Nvidia (NVDA) has accounted for nearly a third of the S&P 500’s gains this year, and an outperformance in quarterly results from large-cap tech continues to be the reason why returns for the S&P 500 are growing year over year.
As of Monday’s close, Apple (AAPL), Alphabet (GOOG, GOOGL), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Broadcom (AVGO) had also contributed more than a quarter of the main index’s gains.
One potential concern is that the market could be at risk if a few big tech companies that have driven a large portion of the gains surprise sideways.
However, research by Morgan Stanley’s chief investment officer, Mike Wilson, shows that this may not be a problem.
Wilson found that about 20% of the top 500 stocks outperformed the broader index over a one-month rolling period. This is the lowest percentage of companies outperforming the Wilson data set dating back to 1965.
Wilson’s work noted that after similar narrow readings where less than 35% of companies outperformed the index for one month, the S&P 500 rose by about 4% on average over the next six months.
“Narrow breadth can persist but it’s not necessarily an advantage to send returns in and of itself,” Wilson said. “We believe expansion is likely to be limited to high-quality/large-cap pockets for now.”
Wilson argued that when considering the impact of high interest rates on corporations, this makes sense. Investors have flocked to large market stocks that have held up well in the higher rate environment and are seeing earnings grow more than their smaller peers.
And a series of recent upgrades to year-end S&P 500 targets reflects a similar sentiment. Three Wall Street firms cited the better performance of technology as part of the reason why the index is doing better than they had originally thought this year.
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