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Nasdaq Jumps as Nvidia Turns a Corner
These years stock market recovery it was led by just a few big names in technology – but that might not be such a bad thing.
Josh Schafer of Yahoo Finance has the information:
“We see a small group of technology winners leading stock gains as a feature of the artificial intelligence (AI) theme – not a flaw,” wrote Jean Boivin, head of the BlackRock Investment Institute, in a research note on Monday. fair. “We remain overweight U.S. stocks.”
AI dear Nvidia (NVDA) accounted for nearly a third of the S&P 500’s gains this year, and outperformance in large-cap technology quarterly results continues to be the reason why S&P 500 profits are growing year after year.
As of Monday’s close, Apple (AAPL), Alphabet (GOOG, Google),Microsoft (MSFT), Amazon (AMZN), goal (GOAL) and Broadcom (AVGO) also contributed more than a quarter of the main index’s gains.
A potential concern is that the market could be at risk if some big technology companies, which generated most of the gains, stop surprising on the upside.
However, research by Morgan Stanley chief investment officer Mike Wilson shows this may not be a problem.
Wilson found that about 20% of the top 500 stocks are outperforming the broader index over a rolling one-month period. This is the lowest percentage of outperforming companies in Wilson’s data set since 1965.
Wilson’s work noted that after similar, narrow readings, in which less than 35% of companies outperform the index on a monthly basis, the S&P 500 rose about 4% on average over the next six months.
“Narrow breadth may persist, but is not necessarily a drag on future returns in and of itself,” Wilson said. “We believe scaling will likely be limited to large/high-quality pockets for now.”
Wilson argued that when you consider the impact of high interest rates on businesses, this makes sense. Investors have flooded into large market cap stocks that have held up well in the higher rate environment and are seeing earnings grow more than their smaller peers.
It is a a series of recent updates to the S&P 500 year-end targets reflect similar sentiment. Three Wall Street firms cited the technology sector’s outperformance as part of the reason the index is performing better than initially anticipated this year.