In a time when many investors talk about the next US recession, the stock market ignores all the traditional warnings and keeps marching higher. For example, the S&P 500 index is up over +11% YTD, a spectacular performance given all the recessionary fears in the market.
It is like investors might spend all of 2023 talking about a recession that is unlikely to happen. How else can anyone explain the inverted yield curve and the LEI indicators pointing to a recession and the stock market rallies?
Either there will be no recession, or something is out of sync with the market. One may argue for both.
First, most of the S&P 500 gains come from seven stocks only, so the tech sector is out of sync with the market. Second, a new bull market started, and in this case, there will be no recession, and the rest of the S&P 500 components will play catch up with the leading mega-tech stocks.
7 mega-tech stocks have returned 53% YTD
Investing can be active or passive – or a mix between the two. Active investors believe they can beat the market and selectively buy or sell stocks and compare their performance with a benchmark, typically the S&P 500 index.
Those active investors betting on the tech sector in 2023 have seen seven mega-tech stocks delivering 53% return YTD:
Meta Platforms (NASDAQ:META)
But passive investors did well YTD. By tracking the S&P 500 index, one would be up +11% YTD without the hustle of owning a particular stock.
As for the rest of the 493 components of the S&P 500 index, they are flat on the year.
What if the mega-tech stocks point to a new bull market?
One thing that everyone is afraid to ask is why stocks are up when they should be down? Therefore, to many investors, it is only a matter of time before a market crash happens.
That may be true, but such opinions may have to consider the fact that the market is more than 20% off its October 2022 lows. Therefore, a new bull market started, and, in this case – what if the mega-tech stocks lead?
Even more interesting is that once stocks are off by more than 20% from the lows, one year later, they have never been lower. On average, they delivered 28.2%, and even the six-month returns were impressive.
All in all, the chances are that stocks may have more upside than is currently priced in. And that is even more likely if the mega-tech stocks’ rally continues.
The post The “Magnificent 7” – mega-tech stocks that led the market higher appeared first on Invezz.