Tech and AI are Driving the Current Market Rally. What Does That Mean for Investors?

July 5, 2023

By cdarmody on July 5, 2023
Read on for more insights into the S&P 500 rally.

We’ve just passed the mid-year post on 2023, and the S&P 500 is up approximately 16% on the year as of June 30 and approximately 20 percent over last year’s market lows.1 As of the end of June, the S&P reached its highest point since April 2022. This would indicate a bull market, yet investors should dig a bit deeper to get the full picture of the drivers behind the rally. 

The biggest mover of the current run-up? Technology. With immense attention being paid to artificial intelligence and machine learning, we’ve seen a strong bounce in stocks in this sector.  In fact, more than 90% of the current S&P rally is due to just a handful of tech stocks, including Nvidia, Apple, and Alphabet, according to a recent article in Financial Times.2 Growth is much more modest or even flat across other sectors, though with inflation moderating, we’re seeing a greater appetite for risk among investors. 

For investors, it can be confusing deciding how to respond to a rally that is uneven. But this could be a good opportunity to see if it makes sense to rebalance your portfolio between asset classes or within different equity buckets to make sure your exposure is aligned with your long-term goals.  

Another thing that investors can consider is that any uneven rally could be short-lived (indeed, there are still some potential economic indicators of a recession looming), so it could be a good time to make charitable gifts with appreciated stock while the rally is lifting prices, in order to make the current environment work for causes you care about.  

As always, you should consult with your advisor before making any investment decisions. For more information from RMB about the current S&P rally, read our June 2023 Market Commentary.

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