Tech leads stocks to records after bear market scare
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The S&P 500 has been on a rollercoaster ride, nearing a new all-time high, only 77 days after dipping into an intraday bear market in April.
Why it matters: Historically, a market recovery of this size and speed signals more gains ahead, so forget the prior lows. This relief rally is bullish.
By the numbers: Ryan Detrick, chief market strategist at the Carson Group, crunched the numbers.
- Stocks are up more than 20% from the April 8 lows.
- A 20% rally in two months has only happened five other times since 1950.
- In all of those prior cases, stocks were higher 1, 3, 6 and 12 months later.
What they're saying: "We think the biggest risk to our view is that we're not bullish enough," Max Kettner, chief multiasset strategist at HSBC, wrote in a note to clients.
- Investors could be "underestimating the boost from AI and the weaker USD," he points out. That could drive efficiencies across the market and cushion any potential earnings weakness, respectively.
Zoom out: What brings the market down tends to bring it back up. In this case: tech stocks.
- Losses in large-cap tech led the market to its April bottom. Now, XLK, an ETF that tacks the biggest tech names in the S&P 500, has hit its highest level in history.
The intrigue: Dan Ives, senior equity analyst at Wedbush Securities, sees the tech rally gaining fuel from the removal of geopolitical risks.
- "With a weakened Iran and no nuclear capabilities, there is a growing view from tech investors that the opportunity for the Middle East to embrace the tech and AI boom is now on the doorstep being led by Saudi and UAE," he wrote in a note to clients.
Reality check: It's not all roses. Market strategists say investors ignore recent headwinds such as trade turmoil and war at their own risk.
What we're watching: Marci McGregor, the head of portfolio strategy for the chief investment office at Merrill and Bank of America Private Bank, expects stocks to be choppy in the months ahead.
- But she also sees earnings growth and AI-driven efficiency, supporting her slightly overweight call on U.S. equities relative to fixed income assets.
The bottom line: If April was a lesson on the importance of staying invested, it may take more than headline-driven volatility to shake investor confidence again.
