Closing of the first half of the year for the US stock market: a 14% increase in the first half of the year, with 60% coming from the top five technology stocks, NVIDIA alone contributing over 30%

The fading expectations of interest rate cuts in the past six months have had no impact on the strong performance of the US stock market.

As of the close on June 28, 2024, the S&P 500 index has risen by 14% in the first half of the year, slightly lower than the performance in the first half of 2023, but still one of the strongest half-year performances since the dot-com bubble of the millennium.

The key support for the rise of the US stock market lies in the AI frenzy. In the first half of the year, nearly 60% of the gains in the US stock market were contributed by just five tech giants - NVIDIA, Microsoft, Amazon, Meta, and Apple, with NVIDIA alone contributing as much as 31% of the gains.

The concentration of gains has become more apparent recently. In the second quarter, NVIDIA, Apple, and Microsoft contributed over 90% of the market's gains.

Due to the market-cap weighting of the S&P 500 index, fluctuations in the stock prices of these giants have a significant impact on the overall market, overshadowing the weak performance of other index components. When calculated on an equal-weight basis, the S&P 500 index has only risen by 4% this year, and may even experience a decline in the second quarter.

Kevin Gordon, Senior Investment Strategist at Jiaxin Wealth Management, believes that historically, it is not uncommon for large-cap giants to contribute the majority of gains in the index, but when other parts of the market perform poorly, it is a warning signal.

However, Denise Chisholm, Director of Quantitative Market Strategy at Fidelity, does not share the same view. She told the media that although the current market concentration is the highest in at least 20 years, many investors believe that the high concentration in the stock market at the moment may be similar to the dot-com bubble and fundamentally unstable. However, she thinks that there have been several periods in the past where "the market remained highly concentrated for a long time." She also pointed out that historically, a high concentration in the stock market is not necessarily a bad thing.

Some investors hope that a scenario similar to the fourth quarter of last year will reoccur, where underperforming sectors will eventually catch up, and tech stocks will not experience a pullback.

Andrew Slimmon, Senior Portfolio Manager at Morgan Stanley, told the media:

Artificial intelligence has sucked all the oxygen out... Its exposure is so high that other areas have been forgotten. I think there are many companies in industries like industrial and finance that are doing very well but are being overlooked.

He is optimistic about the upcoming second-quarter earnings season, believing that this will help draw investors' attention to fundamentally sound companies