The US indices are once again darting, in particular the technological index il Nasdaq Composite who did a +30% YTD and the main index l’S&P 500 which in the first six months of the year recorded an increase of 14%. In comparison, in the same period of time, the European index, Stoxx 600 went up dell’8%, the Chinese index lo Shanghai Composite has experienced growth 4.9% while the Hang Seng in Hong Kong fell about 1%. It is worth underlining the amazing performance of the Japanese index the Nikker 225 (+30%) since the beginning of the year and the Ftse Mib of Milan which scored a + 15% in the first six months of the year.
The S&P 500 denies analysts
As we were anticipating, the S&P 500 recorded a 14% growth, well above that of the index MSCI Worldwho made a +8,5% year to date. The numbers are a clear sign that US stocks are back in fashion. According to data from EPFR over the past three weeks, investments in US stock funds and ETFs amounted to $23.7 billionthe highest volume since December 2022.
While interest in global equity funds declined sharply in the same period, this was the largest outflow since October 2022, following a particularly successful start to the year for global and European equity funds.
Recall that US indices have outperformed other benchmarks around the world for many years. Nonetheless, with the arrival of the “bear market” or heavy selling into US markets following the Fed’s rate policy change and scorching inflation, most analysts and investors had predicted that outflows from US securities to other parts of the world would continue for a longer period of time. And so the current performance of the S&P 500 suggests that these kinds of predictions were decidedly premature.
It is worth noting that US equity funds still have a large gap to fill. So far this year, according to EPFR, they have experienced about $31 billion in net outflows versus net inflows of about 13 billion dollars for global equity funds.
Artificial intelligence is the main driver
The recent enthusiasm for US stocks stems from a boom in interest in the artificial intelligence (AI) industry. Investors buy shares in companies on the cutting edge of technology they think will change the world in the next few years.
The actions Of Nvidiathe maker of the advanced graphics chips required for artificial intelligence, have nearly tripled this yearleading the company to a valuation of 1 trillion dollars. Other tech stocks also skyrocketed. For example the titles Meta Platforms e Tesla have more than doubled. Microsoft, which has unveiled an investment of 10 billion dollars in the ChatGPT of OpenAIhas grown by more than 40%as well as Apple e Amazon.com.
Of course AI is not the only driver of purchases, investors are optimistic about the US as consumers continue to spend freely, the labor market remains robust and the banking crisis appears to have eased, at least for now. Also, many investors are hoping that the Federal Reserve is nearing the end of its interest rate hike phase, which could give more markets more room to run.
On the other hand, the eurozone has slipped into a recession and the continent continues to battle high energy and food costs. Furthermore, the ongoing war in Ukraine is a source of uncertainty for the region. While the US economy is 5.4% larger than it was pre-pandemic, the economy of Euroland has only grown 2.2% since pre-Covid.
Goldman Sachs, it target sull’S&P 500
The target onS&P 500 between now and the end of the year of Goldman Sachs is 4500 or a further increase of 3% compared to the current value. While for the next 12 months it is expected to reach 4700 or (+7%).
According to the Goldman Sachs Economics division, the probability of a recession in the US in the next 12 months is only 25%. “Recent economic data has confirmed that disinflation is underway while the job market remains strong, indicating we are likely headed for a soft landing.” It reads in the GS report.
Meanwhile, the relative performance of cyclical stocks vs. Defensive stocks indicate that the stock market is pricing in more optimistic economic growth prospects than GS economists forecast.