- Big tech stocks led the U.S. equities rally in the first half of 2023 as interest in AI exploded.
- But the rally is now spreading to other sectors, making June the best month of the year for the S&P 500 index.
- A measure of the width of the U.S. stock market just hit its highest level since February.
For most of 2023, the dominant topic for equity investors has been the rise of artificial intelligence, which has fueled an astonishing surge in big tech stocks dubbed the “Magnificent Seven,” including Apple, Microsoft and Nvidia. .
But there are signs that the rise is spreading to other sectors as well.
The benchmark S&P 500 index rose 6.5% in June, its best month since October and trailing the FANG+ Group, a major tech company listed on the New York Stock Exchange.
The word that pops out of analysts’ mouths is breadth. It is used to represent the rise of a wide range of stocks, rather than just a few select stocks. The percentage of S&P 500 stocks trading above the 200-day average, a measure of market spread, rose to 65% this week, the highest since mid-February.
“We’ve been making progress [from the Magnificent Seven]Minerva Analysis founder Kathleen Brooks told Insider in a recent interview.
“We know they’re still very important to the market, but we’re actually seeing a widening range of performance, with many stocks in various sectors hitting 52-week highs.” he added.
A look at the list of the 10 best performers year-to-date includes three cruise lines, along with General Electric, homebuilder Paluto Group, and Nvidia and Meta Platforms, and the 2023 rally is It confirms Brooks’ belief that it’s no longer just about technology. , and Tesla.
According to UBS, one of the factors driving the rally is that investors have seen big tech gains in the first six months of the year, and have invested in stocks to make gains before diversifying into other sectors. It may be that you have decided to sell.
“Investor enthusiasm for the potential of artificial intelligence to boost the tech sector has also supported the year-to-date rally in stocks,” Swiss Bank CIO Marc Hefele said in a recent research note. .
“However, there were signs in June that the bull market was extending to laggards, with megacap AI stocks doing well,” he added.
Strong economic data are also supporting non-tech stocks, with inflation starting to moderate toward the Federal Reserve’s 2% target and May’s The unemployment rate remains steady below 4%.
With much of Wall Street warning of a possible recession, there’s no guarantee these gains will last. But for now, the spread beyond technology looks like good news for investors.
“This shows a really healthy market and a return to passive investing,” Brooks said. “Not only is stock not in danger of collapse, it actually looks healthier than it did when the AI rally started in earnest.”
read more: Forget FAANG and GAMMA. “Magnificent 7” tech stocks, including Tesla and Nvidia, now dominate the market.
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