When war broke out, stocks ignored the news and when conflicts in the Middle East arose, the markets did the same. After the Federal Reserve raised rates to above 5% quickly, the U.S. economic slowdown risks are mounting. Is the S&P 500 (SPY) at risk of pulling back after gaining over 14% YTD?
J.P. Morgan’s (JPM) analyst, Marko Kolanovic, warned last Friday that the index may drop by 20%. He recognized the strong momentum in mega-cap stocks like Nvidia (NVDA). YTD, NVDA stock is up by 36.7%. Other notable winners are First Solar (FSLR) +33.6%, Teradyne (TER) +31.4%, and GE Vernova (GEV) +25.4%.
S&P 500 stocks that lost the most include Walgreens (WBA), down 44%, Builders Firstsource (BLDR), losing 33.6%, and EPAM Systems (EPAM), down nearly 32%.
The analyst failed to appreciate the resiliency in stocks that include AMZN, GOOG, META, AAPL, and MSFT. For example, Apple posted weak device sales but prevented a sell-off by announcing a buyback worth $110 billion. Meta Platforms (META) stopped touting its virtual reality world. Instead, it turned its efforts to Meta AI (Llama 3). Markets forgot about Alphabet’s (GOOG) Gemini AI struggles after the firm posted strong ad revenue from its search engine and YouTube businesses.
Investors do not need to worry about a 20% drop as bullish momentum continues.
