Heavyweight technology stocks have dominated the US stock market in the first half of the year, but a recent correction has raised concerns about the sustainability of the rally. The rise in the market has been driven by a few large-cap tech stocks, with Apple seeing a significant increase of over 45% this year. The Nasdaq Composite Index, which is heavily influenced by technology stocks, has had its largest increase in the first half of the year since 1983, with a cumulative increase of 31.7%.
The surge in technology stocks has been fueled by improved corporate operating performance and the limited room for the Federal Reserve to raise interest rates. As a result, related sectors and valuations have also seen an upward trend. The gains in the communication services sector have been attributed to companies like Yuan Corporation and Alphabet Inc., while the consumer discretionary sector has benefited from Amazon.com.
Artificial intelligence has also received high attention in the market, leading to increases in related concept stocks such as Tesla, which has seen a cumulative increase of over 110% in the first half of the year.
Despite the overall positive sentiment, there are concerns about the narrow rise in the market, as it has been driven by only a handful of stocks. Technical indicators moving outside their usual ranges have also sparked expectations for a market correction. Peter Oppenheimer, global chief equity strategist at Goldman Sachs, believes that while the recent gains reflect increased confidence in avoiding a recession, the rise in a few heavyweight tech stocks raises doubts about the sustainability of the market.
UBS Group’s head of floor trading on the New York Stock Exchange, Art Kassin, warns of potential negatives in the future, such as the Federal Reserve lowering benchmark interest rates for a longer period at higher levels. Venu Krishna, head of US equity strategy at Barclays Bank, points out that despite the push from artificial intelligence-related stocks, the narrow rise in the market is not optimistic and usually indicates an upcoming correction.
A recent survey indicates that investors are shifting their focus towards short-term US Treasury bonds, the S&P 500 index, and foreign stocks for better investment returns in the second half of the year, suggesting a decline in the attractiveness of technology stocks.
Overall, while the US stock market has experienced significant gains in the first half of the year, concerns about the sustainability of the rally and expectations for a correction or consolidation in the near future have begun to emerge.