{"id":18660,"date":"2023-06-06T00:29:19","date_gmt":"2023-06-06T04:29:19","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/what-if-the-sp-500-fumbles-its-bear-market-exit-what-strategists-think-of-the-role-of-tech-in-this-rally\/"},"modified":"2023-06-06T00:29:20","modified_gmt":"2023-06-06T04:29:20","slug":"what-if-the-sp-500-fumbles-its-bear-market-exit-what-strategists-think-of-the-role-of-tech-in-this-rally","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=18660","title":{"rendered":"What if the S&P 500 fumbles its bear-market exit? What strategists think of the role of tech in this rally."},"content":{"rendered":"
\n

The bullish momentum on megacap technology stocks, which recently drove the S&P 500 to its highest level in nearly ten months and put it on the verge of exiting its longest bear-market run since 1948, appeared to fizzle a bit on Monday.<\/p>\n

The S&P 500
\n SPX,
\n -0.20%<\/bg-quote>
\n dropped 8.58 points, or 0.2%, to end at 4,273.79 on Monday, after jumping as high as 4,299 in the morning trading. <\/p>\n

\n

A close above 4,292.48 would mark a 20% rally off the bear-market closing low of 3,577.03 set on Oct. 12, 2022, according to Dow Jones Market Data. That would meet a widely used definition of the end of a bear market.<\/p>\n

See:<\/strong> S&P 500 nears bear-market exit. Will Big Tech\u2019s rally finally spread to the broader stock market?<\/p>\n

While the recent upside swing may have the potential to continue in the near term, some market analysts remain skeptical of the big-picture sustainability of the latest stock-market rally, as robust gains have occurred only in a small group of biggest tech names.\u00a0<\/p>\n

For example, the two largest companies in Technology, Communication Services, and Consumer Discretionary each comprise approximately 50% of the market capitalization of their respective sectors, resulting in extraordinary influence on valuation and returns, essentially masking the weakness in other areas of the market, said a team of analysts led by John Lynch, chief investment officer at Comerica Wealth Management.<\/p>\n

\u201cThe average forward price-to-earnings ratio for the largest six companies in the S&P 500 is approximately 36 times next twelve-month profits, which is essentially double that of the overall index,\u201d they said in a Monday note.<\/p>\n

The market-capitalization weighted S&P 500
\n SPX,
\n -0.20%<\/bg-quote>,<\/span>
\n which has risen 11.3% year to date, is beating its equal-weighted counterpart
\n SP500EW,
\n -0.34%<\/bg-quote>,<\/span>
\n \u00a0which is up 1.5% this year, by nearly 10 percentage points in 2023. That\u2019s the biggest margin of outperformance year to date on record, according to Dow Jones Market Data.\u00a0<\/p>\n

\u201cWhile the S&P 500 is essentially back to its August highs at around 4,300, the equal-weight S&P is around 6% below that and around 7.5% below February levels,\u201d Jonathan Krinsky, chief market technician at BTIG, wrote in a Sunday note. \u201cThe jury is still out as to which way this divergence resolves itself. In the near term, we can see some further rotation into the laggards, but we continue to think that it has difficulty sustaining beyond a bounce.\u201d\u00a0<\/p>\n

See:<\/strong> Small-cap stocks lag in 2023, but here\u2019s where they\u2019re \u2018finally\u2019 starting to see positive earnings revisions<\/p>\n

However, Stephen Hoedt, managing director of equity and fixed income research at Key Private Bank, said focusing on the negative is probably the wrong message for investors, since he expects overall performance to improve, rather than continuing to see less than 10 individual stocks driving gains for the S&P 500. <\/p>\n

\u201cThis kind of breadth divergences can usually resolve themselves in one of the two ways,\u201d Hoedt said. The market-cap weighted index can either have prices hatched down to where the poor market breadth is or act as leadership until the equal-weighted index catches up with breadth improving to where the market-cap weighted index has bet.\u00a0<\/p>\n

\u201cIf you look historically, two-thirds of the time, the market-cap weighted index acts as leadership for the equal-weighted index, and the equal-weighted index plays catch up,\u201d Hoedt told MarketWatch in a phone interview.\u00a0<\/p>\n

U.S. stocks finished lower on Monday with the Dow Jones Industrial Average off nearly 200 points, or 0.6%, to end at 33,562, while the Nasdaq Composite shed 0.1%. <\/p>\n

\u2014 Katie Marriner contributed to this article<\/em><\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The bullish momentum on megacap technology stocks, which recently drove the S&P 500 to its highest level in nearly ten months and put it on the verge of exiting its longest bear-market run since 1948, appeared to fizzle a bit on Monday. The S&P 500 SPX, -0.20% dropped 8.58 points, or 0.2%, to end at […]<\/p>\n","protected":false},"author":1,"featured_media":18661,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-18660","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nWhat if the S&P 500 fumbles its bear-market exit? 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