The reason for the recent rally in the S&P 500
Why this rally can’t be sustained much longer
On Friday June 2, 2023, the S&P 500 almost reached the level it had in August last year.
Now voices are getting louder that assume we are out of the woods, the bear market is over and, thus, a new bull market can start.
I am very skeptical about this. Apart from macroeconomic reasons, this also has to do with the fact that this rally in the S&P 500 is mainly driven by a few stocks that can be assigned to a trend or a sector.
ChatGPT is causing quite a stir in the world. Many assume that this is the next big social revolution — both positive and negative. However, it is precisely this hotly debated topic around artificial intelligence that is causing the rally both in the S&P 500 and in some crypto currencies that have a focus on artificial intelligence.
The chart shows very clearly that if the companies with some connection to artificial intelligence were excluded from the list of 500 companies in the S&P 500, the development would look significantly worse. Conversely, this means that the current rally is being driven by AI-related companies.
Only the future can show whether this is a sustainable rally. However, in my opinion, the example around NVIDIA does not show a sustainable rally but rather an AI bubble.
The stock price rose so quickly with the news that NVIDIA is releasing new AI products that it was impossible to find a price on the daily chart.
For me, this means that I remain cautious about the end of the bear market for now. Factors such as debt ceiling, unemployment, high interest rates, tighter money lending rules at banks and still high inflation continue to put pressure on the markets.
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Disclaimer: The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial, legal or tax advice. The content of this text is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. The author does not guarantee any particular outcome.
