The S&P 500 is up almost 10% this year, despite war, inflation and AI nerves
By John Towfighi, CNN
New York (CNN) — It’s been a wild few months for markets: Oil industry disruption. Resurgent inflation. Nerves about AI. Despite it all, US stocks are still trading near record highs.
The S&P 500 and Nasdaq have surged about 15% and 21%, respectively, since the end of March, bouncing back from an Iran war-related slide for their best quarter in six years.
The indexes are sitting on healthy gains for the year despite a slight pullback in June. All told, the S&P 500 and Nasdaq are up 9.55% and 12.79%, respectively, this year.
The S&P 500 has clinched 24 record highs this year and is about 1.5% from hitting another. The Nasdaq has hit 20 record highs and is about 3.3% away from another.
A June swoon, but a solid quarter
The S&P 500 snapped a two-month winning streak in June to fall about 1%, as investors worried a previous AI rally went too far. The tech-heavy Nasdaq dropped 2.8% in June.
Investors especially want to see how Big Tech companies will earn a return on more infrastructure spending for the AI boom. Microsoft (MSFT) fell 17% in June, posting its worst month since 2000 – the year the dot-com bubble burst. Oracle (ORCL) fell 35%, its worst month since 1990.
Despite the June swoon, the S&P 500 and Nasdaq still posted their best quarterly performances since 2020. A rally in semiconductor and memory chip companies stocks carried the market, although volatility picked up.
An index tracking semiconductor stocks has surged almost 88% since March, its best quarterly performance on record, according to FactSet data that goes back until to 1994. The index launched in December 1993.
Meanwhile, the Dow rose 2.5% in June as investors moved away from tech and into financials, healthcare and industrials, which the Dow has more exposure to. The Dow has gained almost 13% since March, posting its best quarter since 2022.
All told, the Dow is up 8.85% so far this year and trading at record highs. The blue-chip index has clinched 19 record highs this year; seven of them came in June.
What’s next for stocks?
The S&P 500 was up just 5.5% at this point last year, still recovering from the spring tariff shock. The index went on to gain 16% for the year.
In 2024 and 2023, the S&P gained 23% and 24% across the year, respectively.
Wall Street analysts remain optimistic. Barclays in June raised its year-end target for the S&P 500 to 7,800 – implying a gain of 4% across the next six months.
Still, analysts are vigilant about potential risks, especially on AI bubble concerns.
Wall Street is increasingly punishing Big Tech companies for spending on AI without profits to justify it. The upcoming quarterly earnings season will offer more insight about companies’ spending plans.
Traders have moved on from headlines about the war with Iran and are focused on the Federal Reserve’s interest rate moves as well as corporate earnings.
Some investors are cautious about a potential pullback after such a strong quarter. David Laut, CEO at Kerux Financial, said he’s staying prepared for a potential stock market drop as big as 10% to 20% and watching his exposure to technology stocks, preferring to keep his holdings lighter than other stocks.
“We believe the market volatility seen so far in June is the tip of the iceberg,” Laut said in a note.
But Louis Navellier, CEO at investment management firm Navellier & Associates, said he views any dip in stocks as a buying opportunity – and he expects the AI boom to continue for at least another three years.
Jose Rasco, HSBC Private Bank chief investment officer for the Americas, said in a note that volatility could persist, but he remains optimistic because of a strong set-up for corproate earnings.
“The AI news flow will undoubtedly have its ups and downs, and this is key because so much of global sentiment is now linked to this single factor,” Rasco said.
The-CNN-Wire
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