{"id":13051,"date":"2024-03-13T16:34:59","date_gmt":"2024-03-13T16:34:59","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13051"},"modified":"2024-03-13T16:35:00","modified_gmt":"2024-03-13T16:35:00","slug":"will-the-market-rally-extend-beyond-big-tech","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/will-the-market-rally-extend-beyond-big-tech\/","title":{"rendered":"Will The Market Rally Extend Beyond Big Tech?"},"content":{"rendered":"\n

Eric B. from Edison, NJ asks:<\/em> Hello Mitch, I understand that the stock market is doing well this year so far. But it seems like it\u2019s just a continuation of last year when really big technology companies are doing much of the heavy lifting. Do you see that as an issue?<\/p>\n\n\n\n

Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n

Thanks for sending me an email, Eric. Late last year, the \u201cMagnificent Seven\u201d stocks were a significant driver of the market rally, and so far, this year, technology stocks are up double-digit percentages. Your question concerns the seeming lack of breadth in this market rally\u2019s trend.1<\/sup><\/p>\n\n\n\n

But a closer look now shows that the market\u2019s gains have spread beyond just mega-cap technology companies. For instance, the S&P 500 equal-weighted index has now also risen to a record high, and I\u2019d note that about 20% of stocks in the S&P 500 are now trading at 52-week highs. That\u2019s the most we\u2019ve seen since May 2021.2<\/sup><\/p>\n\n\n\n

Small-cap stocks have also been participating in the recent rally, with the Russell 2000 index up nearly 30% from its October lows. Small-caps stand to benefit from lower rates in the future, as refinancing costs can have a meaningful impact on small-cap companies\u2019 balance sheets. Small-caps also tend to be economically sensitive, so investors may be pricing in the expectation of a soft landing.<\/p>\n\n\n\n

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The bottom line, however, is that tech does continue to lead, and you\u2019re asking if I see that as an issue. I would be concerned if, much like in the late 1990s, technology companies were being bid-up to exorbitant premiums with no earnings and free cash flow to justify sky-high prices. But that\u2019s not what we\u2019re seeing now.<\/p>\n\n\n\n

The Tech sector is the biggest earnings contributor to the S&P 500 index, and it is expected to bring in 28.6% of the index\u2019s total earnings in 2024. The second and third biggest contributors are Finance and Medical, at 17.8% and 12.5%, respectively.<\/p>\n\n\n\n

In Q1 2024, Tech sector earnings are expected to increase +18.9% from the same period last year on +7.9% higher revenues. This would follow the sector\u2019s +27.4% year-over-year earnings growth in Q4 2023, on +8.5% higher revenues. In short, U.S. technology companies are delivering blistering earnings, and their stock prices are pushing higher. The two are connected. As seen in the chart below, technology\u2019s $158.2 billion earnings tally in Q4 2023 was a new all-time quarterly record.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

With outstanding earnings like what we\u2019re seeing in tech, we\u2019d expect the sector to lead. 2024 should usher in earnings recoveries for other sectors as well, however, as U.S. economic growth is expected to continue throughout the year. I think we\u2019ll see more breadth to the market rally in the process.<\/p>\n\n\n\n

During this unpredictable period, I recommend revisiting your investment portfolio to ensure its resilience in the face of market changes!<\/p>\n\n\n\n

Our free guide, \u201cHelping You Manage Market Volatility<\/a><\/em><\/span><\/strong>\u201d, is a great tool to use for expert insights during market turbulence and answers questions like:<\/p>\n\n\n\n

\u2022 Market downturns can and will occur, but what should you do?
\u2022 How can diversification help you manage volatility without compromising your returns?
\u2022 When volatility is too much for you to handle, how can a money manager help?
\u2022 Can volatility actually be an opportunity?<\/p>\n\n\n\n

If you have $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!<\/p>\n","protected":false},"excerpt":{"rendered":"

The \u201cMagnificent Seven\u201d stocks were a big driver of last year’s market gains\u2014Mitch looks at if and when the rest of the market will join the rally.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-13051","post","type-post","status-publish","format-standard","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13051","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=13051"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13051\/revisions"}],"predecessor-version":[{"id":13054,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13051\/revisions\/13054"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13051"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13051"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13051"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}