The S&P 500 (SP500) recorded a rally on Friday 15.90% gain for the first six months of 2023, while the accompanying SPDR S&P 500 Trust ETF (New York: The Spy) added 15.91% for the same period.
The index’s record rise in the first half was driven by a combination of Factors, chief among them the sharp advance in technology-led equity growth. Positive sentiment was also boosted by signs that the Fed’s aggressive rate hike campaign was having an intentional slowdown effect on the economy, as market participants increased their bets that the central bank will have to end its monetary tightening this year.
“By far, the biggest driver of the strong gains in the first half is the phenomenal performance of growth sectors, aided by artificial intelligence (AI) intelligence and improved earnings trend. There are only three sectors outperforming the S&P 500 (SP500) and all of them are growth or near-growth sectors,” Keith said. Lerner, chief investment officer of Trust, for the website Seeking Alpha.
“Technology is up 42%, telecom services are up 36%, and consumer appreciation (which holds Amazon (AMZN) and Tesla (TSLA)) is up 32%. Combined, these three segments account for 47% of the total market weight; how : “They are doing important things.”
The explosive increase in technology stocks this year has made headlines. After being shunned for the most part in 2022, investors have returned to high-profile names like FAANG companies. Moreover, the craze around artificial intelligence has played a major role, with heavyweights such as Microsoft (MSFT) and NVIDIA (NVDA) expanding new horizons.
The Nasdaq Composite Heavy Index (COMP.IND) rose 31.73% in the first half, its best first-half performance since 1983. The Nasdaq 100 (NDX), which includes only the major technology stocks, posted an even more impressive rise of 38.75%. . In the first half, it was his best first-half showing ever.
“Apple (AAPL) Weighting of 7.63% and $3 oz combined with Microsoft Artificial Intelligence (MSFT) Lifting and Weighting of 6.78% is one of the main drivers behind the S&P 500 (SP500) rally in the first half,” Chris Lau, President The investment group in the “DIY value investment” said, “look for alpha.”
The H1 performance of the S&P 500 (SP500) this year is in stark contrast to the same time period last year. Back in 2022, the benchmark posted its worst first-half performance in 52 years, ultimately closing the year down nearly 20%, its biggest annual drop since the 2008 financial crisis.
“Going into (2023), one of our main themes was keeping an open mind. We believed in, and continue to see, that the traditional playbook is challenged in a post-pandemic world, where crosscurrents remain intense,” said Keith Lerner of Trost. .
“From excess consumer savings, which continue to protect the consumer, to the shift from goods to services, to an unemployment rate that continues to hover around a 50-year low despite the Fed’s most aggressive rate-raising cycle in decades, to the recent strength of… Clear expectations in the housing market, even though mortgage rates are over 7%, the environment looks unusual,” Lerner added.
Looking forward to H2
Alpha contributor Damir Tokic believes that investors should prepare for a so-called “hard landing,” as the late effects of the Fed’s aggressive monetary policy tightening should start to become more apparent in the remainder of the year.
“However, growth is likely to contract while core inflation remains high and likely steady, which could force the Fed to remain constrained, despite the growth contraction,” Tokic said Thursday, adding that “this is consistent with a hard landing scenario.” And the resumption of the bear market in the S&P 500 (SP500).
As Chris Lau of DIY Value Investing put it, some words of caution: “The market ignores the persistently high inflation and the Fed ramps up rates. Despite adding another 50 basis points for the second half, the markets are fighting the Fed. That didn’t work.” Should the sentiment be reflected, it will happen suddenly and without warning.”
“Summer is an unlikely period for any sell-off. Expect fear to return in the fall, when real issues like commercial real estate and a sharp slowdown in consumer demand hurt markets thanks to higher interest rates,” Lau added.
Fed Chairman Jerome Powell has continued to signal the possibility of another rate hike, and the central bank’s latest point chart showed that policymakers expect two more rate hikes this year. However, according to the CME FedWatch tool, markets don’t seem to believe the Fed, and are only pricing in once.
sector performance in the first half
As expected, growth regions topped the list of S&P’s sector leaders in the first half of the year. Technology led the way with a whopping 42% gain, followed by a 36% jump in telecom services and a 32% increase in consumer appreciation. Of the 11 S&P sectors, five finished H1 in the red, with energy and utilities down more than 7% each.
See below a breakdown of the sector performance as well as associated SPDR Select Sector ETFs from December 30, 2022 through June 30, 2023:
#1: IT +42.06%Technology Select Sector SPDR ETF (XLK) + 39.71%.
#2: Communication services +35.58%SPDR Telecom Sector Selection Fund (XLC) + 35.61%.
No. 3: Consumer appreciation + 32.33%Consumer Discretionary Sector SPDR ETF (XLY) + 31.47%.
No. 4: Industries +9.22%Industry Specific SPDR ETF (XLI) +9.34%.
Figure 5: Materials +6.61%Materials Identification Sector SPDR ETF (XLB) +6.68%.
No. 6: real estate +1.85%Sector Selected Real Estate SPDR ETF (XLRE) +2.06%.
No. 7: Consumer staples -0.04%Consumer Staples Select Sector SPDR ETF (XLP) -0.51%.
No. 8: Financial statements -1.51%and a SPDR ETF (XLF) in the selected financial sector -1.43%.
No. 9: healthcare -2.33%and an SPDR ETF (XLV) for the healthcare sector -2.30%.
Figure 10: Facilities -7.16%Sector Selected Utilities SPDR ETF (XLU) -7.18%.
No. 11: Energy -7.26%Energy Sector SPDR ETF (XLE) -7.20%.
Below is a chart of 11 sectors’ year-to-date performance and how they fare compared to the S&P 500 (SP500). For investors looking to the future of what happens, take a look at Alpha Catalyst Watch for next week’s breakdown of actionable events that pop up.