{"id":25956,"date":"2023-06-22T09:21:28","date_gmt":"2023-06-22T13:21:28","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/nvidia-tesla-and-the-deceptive-stock-market-rally\/"},"modified":"2023-06-22T09:21:30","modified_gmt":"2023-06-22T13:21:30","slug":"nvidia-tesla-and-the-deceptive-stock-market-rally","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=25956","title":{"rendered":"Nvidia, Tesla, and the Deceptive Stock Market Rally"},"content":{"rendered":"
\n
<\/p>\n
<\/p>\n<\/figure><\/div>\n

The
\n S&P 500
\n has surged in 2023 but the gains aren\u2019t what they seem. They\u2019re mostly due to a few individual stocks, Nvidia and Tesla among them, that have masked what\u2019s been a pretty mediocre year for the stock market.<\/p>\n

At first glance, the stock market appears to have done quite well in 2023. As of the close on June 20, the S&P 500 had jumped 14.3% in 2023. That\u2019s well above the 10-year and 20-year average through that date of 3.6% and 3%, respectively, according to Dow Jones Market Data. <\/p>\n

\n

That\u2019s also a major change from this time last year. As of June 20, 2022, the S&P 500 was down 23%. Rising interest rates, inflation, economic uncertainty, and fears of a recession were weighing on the stock market, specifically on the tech giants that make up a large portion of the index.<\/p>\n

Those worries have eased, but not dissipated this year. While the Federal Reserve has temporarily paused its aggressive path of monetary policy, the Central Bank will most likely raise interest rates again as inflation remains stubbornly high. Recession concerns linger, and corporate profits may or may not recover in the year ahead. Still, the S&P 500 is on a tear.<\/p>\n

The index\u2019s rise this year has pushed the S&P 500\u2019s market cap to about $39 trillion, which is up about $5 trillion year-to-date. But the index\u2019s moves are mostly attributable to the \u201cBig Seven\u201d tech stocks:
\n Tesla
\n (ticker: TSLA),
\n Nvidia
\n (NVDA),
\n Meta Platforms
\n (META),
\n Apple
\n (AAPL),
\n Microsoft
\n (MSFT),
\n Alphabet
\n (GOOGL), and
\n Amazon.com
\n (AMZN). <\/p>\n

Electric vehicle maker Tesla\u2019s 123% rise through June 20 added $437 billion to the S&P 500\u2019s market cap, while Nvidia\u2019s 200% rise added $695 billion this year. The $1.1 trillion from those two companies has accounted for about three percentage points of the total year-to-date return of the index.<\/p>\n

Exclude the rest of the Big Seven, and that $1.1 trillion is more than all other stocks in the index combined. Together, megacap tech has attributed almost 12% of the total gain to the S&P 500 this year. By excluding those seven stocks, the index would be up around 3% year-to-date, making it a truly average year. <\/p>\n

The moves of these stocks can be attributed to investor excitement about artificial intelligence. Major tech companies have been racing to push out the hottest AI products, which experts believe will be the future of the industry. This has caused traders to buy up shares of the tech giants they had sold the previous year, leading to a rebound in the market and increasing valuations of these stocks.<\/p>\n

But the major climb of tech stocks can also come crumbling down if the Fed gets more aggressive with rate hikes after its pause. That would be a problem for the overall market, which is riding the wave of these few stocks\u2019 solid performances. <\/p>\n

\u201cWith sentiment still \u2018bullish\u2019 and\u00a0markets\u00a0overbought, Powell could provide a modicum of support to the\u00a0market\u2019s advance, but if he suggests that he\u2019s in the hawkish camp,\u00a0markets\u00a0may need to continue to unwind gains until a more viable catalyst emerges,\u201d Quincy Krosby, chief global strategist for LPL Financial, wrote.<\/p>\n

Many experts are informing traders to be mindful of the AI boom. This includes Paul Gray, managing partner of Ironhold Capital Management.<\/p>\n

\u201cFor many companies, in a number of industries, AI has the potential to significantly improve productivity. However, just because a company uses AI doesn\u2019t mean that the company now deserves an astronomical valuation,\u201d Gray wrote. \u201c\u2026It\u2019s unlikely that the recent surge in AI stocks is warranted and investors should consider all that has been discussed thus far before they jump on board the AI train.\u201d<\/p>\n

And that\u2019s true whether you buy the individual stocks or the S&P 500. <\/p>\n

Write to Angela Palumbo at angela.palumbo@dowjones.com<\/p>\n<\/p><\/div>\n<\/div>\n

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

The S&P 500 has surged in 2023 but the gains aren\u2019t what they seem. They\u2019re mostly due to a few individual stocks, Nvidia and Tesla among them, that have masked what\u2019s been a pretty mediocre year for the stock market. At first glance, the stock market appears to have done quite well in 2023. As […]<\/p>\n","protected":false},"author":1,"featured_media":25957,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-25956","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nNvidia, Tesla, and the Deceptive Stock Market Rally | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The S&P 500 has surged in 2023 but the gains aren\u2019t what they seem. 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