Wall Street delivered what most investors, strategists, and experts did not expect. It could be because no one predicted a $5 trillion artificial intelligence-fueled tech boom or a banking meltdown. The S&P 500 index, which accounts for over 80% of market capitalization, has a YTD return of nearly 14.04%.
Top performers of the S&P 500 in the first half of 2023 are Nvidia, Meta, Royal Caribbean Cruises, Tesla, and Carnival Corp, delivering YTD returns between 95% to 190%. Nvidia tops the chart with 186% YTD.
Though the technology sector tops the chart, the consumer cyclical sector dominated the top performers. Consumer cyclical is the sector that relies heavily on the business cycle and economic conditions. These firms usually operate in leisure, retail, household durables, recreation, automotive, and media. Despite having market capitalizations of less than $30 billion, consumer cyclical companies Royal Caribbean Cruises and Carnival both made it into the top 5 performers.
Next week’s presentation of the findings of the Federal Reserve’s annual stress tests will be a key focus in the banking industry. Larger adjustments for banks are likely to come later, as the Federal Reserve considers new Basel III Endgame rules, particularly in light of the collapses of Silicon Valley Bank and First Republic.
Inflationary risks are still posing a danger to the US market after the US Fed remained aggressive even after pausing rate hikes in June’s FOMC meeting. Therefore, the expectations of further rate hikes in the second half of 2023 could show volatility in the US market.
Numerous factors are currently working against the US stock market, including inflation, rising interest rates, and the ongoing Russia- Ukraine conflict. Nonetheless, a few encouraging signals may aid in the market’s recovery in the second half of the year. For instance, earnings growth is expected to continue being strong, and the economy is still growing, although slowly.