In One Chart | Wall Street Eyes New Sectors for the Next Stock Market Surge
Recent data shows that defensive sectors like utilities, consumer defensive, and healthcare have outperformed the information technology sector over the past month, reaching 52-week highs.
Notably, several stocks within these sectors have shown exceptional performance. Pharmaceutical giants with market values in the hundreds of billions, such as $Eli Lilly and Co (LLY.US)$, $Thermo Fisher Scientific (TMO.US)$, $AbbVie (ABBV.US)$, and $Regeneron Pharmaceuticals (REGN.US)$, have all demonstrated strong gains.
The high concentration of market gains in a few tech stocks has long been a concern for investors. The recent broad-based sector growth is a welcome change. Analysts believe that more widespread earnings growth is beneficial, providing investors with more opportunities beyond just a handful of tech stocks. This shift could lead investors to move from large-cap stocks to smaller, higher-growth stocks and previously underperforming stocks, creating a more balanced market.
Ryan Detrick from Carson Group noted, "The stock market is no longer solely dependent on tech stocks. Seeing leadership from more cyclical sectors is a positive sign for investors." For the $S&P 500 Index (.SPX.US)$ to continue setting new records, it will need more stocks to contribute to its upward momentum.
"Magnificent Seven" have significantly driven the stock market's rise, peaking in July with a combined $17 billion market cap, representing 34% of U.S. market value. However, broader earnings growth is anticipated to extend beyond this elite group.
Craig Sterlin of Amundi U.S. suggests a regime shift is underway, with earnings recovery signs emerging outside these high-flying tech companies. He predicts earnings growth will decelerate for the "Magnificent Seven" next year but increase for the rest of the S&P 500, assuming the U.S. avoids a recession.
It's not to say that tech is a bad place to be because they've had a big run," Vendig said. "But there are other companies experiencing earnings growth."
Investors are also considering mixed economic data, a heated political climate, and potential Fed rate cuts. Crit Thomas of Touchstone Investments notes that corporate earnings typically broaden post-downturn, hinting at a soft landing scenario but acknowledging many uncertainties. Sterling emphasizes the need for clear value paths for companies, indicating that investment decisions are driven by valuation prospects.
It's telling you the rally is broadening out," said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management.
After a big rally in the "Magnificent Seven" tech stocks earlier this year, investors appear to be hunting for bargains in other areas of the market, he noted.
Source: Bloomberg, Finviz, Market Watch
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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104656319 : hy
webguybob : so how do we use moo to identify potential high performance stocks in the broader sectors?
73279472 : ok
71768068 webguybob : simply russell2000
webguybob 71768068 : I recently shifted most of my large caps to ishares IWF, so I might be covered?
10baggerbamm 71768068 : the Russell's going to do shit I follow Tom Lee he's brilliant he's been dead right on the tech rally but for him to say the Russell's going to rally 40% between now the end of the year he's wrong and I'll tell you why I believe he's wrong.
for over 4 years the basket of the Russell stocks have had declining revenues that's number one so any rally is a multiple expansion rather than an earnings increase meaning they're getting more expensive. number two 40% of the Russell have zero profits that means they have losses. over 80% of the Russell are heavily in debt at high interest rates they're borrowing at 12 13% interest they need rates to come down significantly in order to make a material difference in their debt service so they can refinance it at lower levels. a quarter point does shit a half point does shit one point you'll get some that refinance debt you need about 150 to 200 basis points that's 1.52% reduction in rates before they will have any material difference in their bottom line earnings because they're not paying interest at 12 and a half 13% will be able to bring that down, to around 9% or so. you really need rates to go down about 300 basis points so that many of the companies are able to borrow again at much cheaper rates so they can expand their business that's not going to happen till like June next year best case scenario.. so just buying the Russell I think it's foolish because the best companies are removed from the Russell case in point super micro.
and lastly small cap stocks need a strong economy and lowering interest rates is sign of a weakening economy that hurts them.