Quick Bites | It isn’t just Big Tech driving the US market

Strong US growth is prompting investors to buy a broader set of stocks, rather than just the handful of giant technology companies known as the Magnificent 7 (Mag 7) that drove indexes to record heights.

Source: Wall Street Journal

With 2 of the Mag 7 heavyweights including Apple and Tesla sinking this year, a larger group of companies has helped power recent gains. The equal-weighted S&P 500, which measures each company equally rather than by its market capitalisation, rose to a record last week. Almost one-fifth of the stocks in the index hit new 52-week highs on a recent day, the largest share since May 2021, according to research by Bespoke Investment Group.

The shift signals Wall Street’s acceptance of the idea that the US economy has weathered the worst of this cycle’s interest-rate increases. That clears the way for potentially large gains in all kinds of assets, including smaller and riskier stocks.

Our core market views are still that risk assets will continue to trend higher, supported by a mix of solid US growth and slowing global inflation. We think that the positive macro backdrop is still enough to matter more than expensive valuations.

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