S&P hits new highs, fuelled by Big Tech
Alex Rankine Markets editor
The mood of the global elite gathered in Davos often serves as a contrarian indicator, says James Mackintosh in The Wall Street Journal. When they’re “depressed, buy. When they’re positive, sell”. At last month’s annual gathering in the Swiss resort you could barely move “without having artificial intelligence pushed at you” as a universal balm – so is it time to sell?
AI hype helped drive “stunning gains” for the “magnificent seven” stocks (Microsoft, Apple, Google-owner Alphabet, Amazon, Nvidia, Facebookowner Meta and Tesla) last year. The grouping is a dominant force on Wall Street, together accounting for 29.5% of America’s S&P 500 index. Boosted by Big Tech, at the end of last week the S&P closed above the symbolic 5,000-point level for the first time.
The rally of this narrow group of stocks has disguised a “stealthy correction” in many other parts of the market, Kevin Gordon of Charles Schwab tells Nicholas Megaw in the Financial Times. “Only half of stocks in the S&P 500 have risen this year.” On an equal-weighted basis (which strips out the outsized weightings of the tech megacaps), “the index… remains below the all-time high it set in early 2021”.
It is hard to overstate the scale of the tech giants, says Nils Pratley in The Guardian. Apple alone is worth more than the entire UK stockmarket. Combined, the magnificent seven accounted for 17.2% of the MSCI All Country World Index, a global stock benchmark, as of the end of 2023, says Duncan Lamont of Schroders. Extraordinarily, that is almost the same as the share of the Japanese, British, Chinese, French and Canadian markets combined. “Seven US companies equals five countries.”
Excluding Tesla, the big seven tech stocks are on course to report a 62.8% jump in earnings for the most recent fourth quarter, say Hardika Sing
