As we enter Q3, the S&P 500 is up 14.5% for the year, while the Nasdaq Composite has rallied more than 18%. The Dow Jones Industrial Average saw a more modest gain of 3.8% in the first six months. More than two-thirds of the S&P 500’s gains have been driven by Nvidia, Apple, Alphabet, Microsoft, Amazon, Meta, and Broadcom, with Nvidia alone accounting for nearly one-third of these gains. Only two sectors have outperformed the S&P 500 this year: Communications Services and Information Technology, both rising more than 18% compared to the S&P 500’s roughly 15% gain.
Despite the interest rate cuts, AI is playing a significant role in driving stock prices up, with nearly 30% of the gains contributed by Nvidia (#NVDA), the AI leader, which has become an alternative leading indicator for market movements. However, #NVDA is under pressure as its price reached an all-time high of $140.63 on June 20 and has declined since then. It has repeatedly challenged its short-term moving average but failed, creating a tight trading range with technical resistance at $128.12 and support at $118.04. A breakout of this range will help us foresee where the momentum is headed. The bottom line is that the stock remains in its long-term trend. Unless the AI narrative fades or #NVDA loses its competitive advantage, a pullback within the uptrend will only make its current premium forward P/E more reasonable.
#TSLA is another barometer we need to pay attention to. Recent data indicates that Tesla is losing its market majority as competition intensifies and consumer sentiment shifts, suggesting that more EV owners may hesitate due to insufficient charging facilities
Interestingly, #TSLA has not continued its stock price decline since the end of April. Initially, this may have been due to a technical rebound, but now the reason has shifted to its Robotaxi reveal and its commercial ambitions in AI, robotics, and hybrid compute (including distributed thermal and compute in the car). As a result, #TSLA is moving robustly. However, for #TSLA to completely change its gloomy outlook, it needs to break out of its nearly three-year long-term downward trend. We need to closely monitor to ensure that the momentum is not only sustained but that the shift is also valid.
In June, our long-term investment portfolio achieved a return of 15.44%, despite a pullback in our major holding, #NVDA. This brings the cumulative gain since May 2020 to 152.5%. Our dynamic investment portfolio gained approximately 7.79%, resulting in an overall return of 75.84% since May 2020. (For detailed insights, please refer to our latest performance report). Additionally, our closed note portfolio has provided an average return of 15.63% since April 19, 2021. During this period, the market reached multiple all-time highs (ATHs), demonstrating the effectiveness of a principal-protected note in such conditions.
Since last October, the market has maintained a short-term uptrend, with prices moving significantly above the 200-day moving average, indicating a potential pullback. Data highlights a stark contrast in returns between large-cap and small-cap stocks, with US large caps achieving a 15.2% return compared to a -0.8% return for small caps. Similarly, US growth stocks have outperformed, delivering a 20.5% return versus a 6.5% return for US value stocks. This rally has been heavily concentrated in US tech companies, especially the large-cap tech giants. It remains uncertain whether this momentum will broaden to lagging sectors or if the narrow breadth of the rally can persist. However, the movements of these leading companies could provide insights into the market’s future direction.