"The Party Is Not Over: Tech Stock Rally Continues"

As the rally in technology stocks continues in the U.S. stock market, the earnings season is set to begin next week. The market expects earnings to exceed forecasts, leading to predictions that the technology stock rally will continue into the second half of the year.

[Image source=Reuters Yonhap News]

Bloomberg Intelligence (BI), the economic research arm of Bloomberg News, analyzed on the 9th (local time) that this year's technology stock rally is not a "sign of doom" but rather a "reversal of last year's crash." BI stated that concerns about the stock market performance being heavily concentrated in seven stocks (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, Meta) and the possibility of significant volatility are premature, noting that the rally in the first half of this year differs from the 2000 IT bubble. Recently, there have been worries that if even one or two of these seven stocks falter, the entire S&P 500 index and the $15 trillion (approximately 1,954 trillion KRW) in assets tracking this index could become vulnerable, but BI dismisses these concerns. The top seven large technology stocks that showed a rally in the first half of this year account for 20-28% of the total market capitalization of the S&P 500 index, so their impact on the overall index is significant.

Gillian Wolf, an analyst at BI, said, "This year's large technology stock rally is different from the IT bubble when dot-com companies collapsed and the Nasdaq experienced the largest decline in history," citing the "very strong earnings outlook" for these technology stocks as the basis. According to BI data, the net income of the top five S&P 500 stocks?Apple, Microsoft, Alphabet, etc.?is expected to increase by 16% year-over-year in the second quarter of this year. In contrast, the average earnings of companies in the S&P 500 index are expected to decline by about 8%.

Nancy Tengler, Chief Investment Officer (CIO) of Tengler Investments, emphasized, "You need to participate in the new generation of technological changes, such as artificial intelligence, which led the index's rise in the first half of this year," adding, "The party for technology stocks will last longer." According to BI analysis, the difference in investment returns between the top seven stocks of the S&P 500 index and the remaining stocks in the first half of this year was the largest since the 2000 IT bubble.

On the other hand, there are opinions that the rise in technology stocks may be limited in the second half of the year. The U.S. central bank, the Federal Reserve (Fed), has signaled two interest rate hikes later this year starting with the monetary policy meeting on the 25th-26th, and the Nasdaq 100 index is currently trading about 30% higher than its 10-year average, which could pose a burden on the continuation of the rally.

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