The stock market has experienced an impressive run this year, largely driven by the gains of major tech companies. However, July proved to be a turning point, with the Dow outperforming the seven tech stocks that had been responsible for much of the rally.
According to Nicholas Colas, cofounder of DataTrek Research, the Dow’s strong performance in the second half of the year can be attributed to some of its highest weighted holdings finally showing progress. This shift is seen as a positive sign, but it is essential for this trend to continue.
Despite concerns surrounding high inflation, rising interest rates, and the possibility of a recession, all three major indexes – the Dow Jones Industrial Average, the Nasdaq Composite, and the S&P 500 – have logged gains for the month of July. They have showcased remarkable resilience throughout the first seven months of the year.
In particular, the tech-heavy Nasdaq 100 has been on a winning streak, climbing 3.6% in July alone. This marks its fifth consecutive month of gains, which is the longest winning streak since August 2020. The index has rallied an impressive 44% this year and is on track for its best performance in the first seven months on record.
Investors have enthusiastically bought shares of tech stocks that experienced a significant decline in 2022. The optimism surrounding the potential of artificial intelligence and its impact on these companies has propelled their stock prices higher.
The stock market is evolving, with a broader range of sectors contributing to its strength. While big tech companies played a vital role in the market’s performance earlier this year, it is encouraging to see other sectors also making meaningful contributions. This diversified growth will be instrumental in maintaining the market’s momentum moving forward.
Gains in Tech Stocks Propel S&P 500 to 19% Increase in 2023
The S&P 500 saw a significant boost in 2023, thanks to gains in seven prominent tech stocks often referred to as the “big seven.” This increase amounted to an impressive 19%, with a further 2.8% rise in July. The big seven include Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA), Alphabet (GOOGL), Amazon.com (AMZN), and Meta Platforms (META).
According to Richard Saperstein, chief investment officer at Treasury Partners, the tech sector’s earnings and guidance have exceeded expectations, maintaining an impressive pace. Saperstein believes that the artificial intelligence narrative will continue to drive the industry’s multiples.
For long-term investors, Saperstein recommends sticking with big tech companies due to their consistent earnings growth and cash flow. Additionally, he predicts that the adoption of AI will further enhance the industry’s elevated multiples.
In contrast, the Dow has experienced a 7.1% gain in 2023, representing its best performance in the first seven months of the year since 2021. In July alone, the Dow increased by 3.1%.
Although the Nasdaq has outperformed both the S&P 500 and the Dow, it is worth noting that the top six stocks in the Dow surpassed the big seven stocks in terms of performance this month.
The leading stocks in the Dow for July were:
- Boeing (BA) – Up 13%
- 3M (MMM) – Rose by 12%
- Goldman Sachs (GS) – Increased by 11%
- JPMorgan Chase (JPM) – Gained 8.6%
- Intel (INTC) – Climbed 8.3%
- International Business Machines (IBM) – Up by 7.4%
As for July’s performance of the big seven stocks, Meta rose by 13%, Alphabet surged by 11%, Nvidia jumped by 10%, Amazon climbed 2.2%, Tesla gained 1.7%, Apple rose by 1.1%, and Microsoft declined by 1.9%.
In conclusion, the tech sector’s impressive gains have significantly contributed to the overall growth of the S&P 500 in 2023. Despite the outperformance of the Nasdaq, the Dow’s top six stocks managed to surpass the big seven stocks in terms of performance for the month of July.
