5 Stocks Including MS and Tesla Lead US Stock Market Rally This Year

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] An analysis has emerged that the outlook for the stock market next year has darkened due to the fact that five tech stocks led the rise in the U.S. stock market this year.

The Wall Street Journal (WSJ) reported on the 21st (local time), citing Goldman Sachs' analysis, that "the Standard & Poor's (S&P) 500 index rose 24% this year, and about one-third of that increase was thanks to a small number of tech stocks rising."

The stocks in question are Microsoft (MS), Nvidia, Apple, Alphabet, the parent company of Google, and Tesla. In particular, since last April, they accounted for about half of the S&P 500 index's gains.

Regarding the U.S. stock market's rise being driven by a few stocks, some express concerns that if these stocks falter, there will be no alternatives.

Peter Checchini, head of research at hedge fund Axonic Capital, pointed out, "For whatever reason, if these stocks do not rise, there are no other stocks to support the market." Olivier Sapati, securities officer at investment advisory firm Genttrust, said, "The most worrisome point is the vulnerability," adding, "Too much value is concentrated in a few stocks."

According to Goldman Sachs, after the market breadth narrowed, the S&P 500 index recorded below-average returns over 1-month, 3-month, 6-month, and 12-month periods. Last week, the S&P 500 index fell about 2%, while during the same period, the five stocks including MS and Apple all dropped at least 4.2%.

Investor sentiment regarding the future stock market outlook is also poor. According to a survey conducted earlier this month by the American Association of Individual Investors (AAII), 42% of respondents said they expect stock prices to fall within the next six months, the highest in over a year.

However, there are economic indicators showing that there is still room for the stock market to rise further. For example, corporate earnings and profit margins have exceeded expectations, and although nominal and real interest rates are rising, they remain at low levels.

WSJ added, "There is also a counterargument that corporate earnings may deteriorate as more companies suffer from inflation and supply chain bottlenecks."

This content was produced with the assistance of AI translation services.