The U.S. stock market finally closed down in the early hours of Saturday morning, ending the bull market in the first half of 2024. What will be the trend in the second half of the year?
Let's take a look at Bloomberg's overall assessment of the current state of the U.S. stock market:
1. Although the U.S. stock market closed down in the early hours of Saturday morning, it still created a 14% increase since 2024, setting the second best start to the year record this century. The last time was in 2021.
2. Bloomberg believes that the strength of the U.S. stock market is due to the resilience of the economy, corporate profits and strong demand for artificial intelligence.
3. Although there are signs of a cooling economy, the expected interest rate cuts by the Federal Reserve in the future may be a factor that drives U.S. stocks to continue to rise in the second half of the year.
4. Looking back at history, a strong stock market in the first half of the year will often continue to rise in the second half of the year, but current unstable factors still exist, namely the uncertainty of interest rate cut expectations and the general election in November.
5. According to Bloomberg statistics, from the lowest point on October 12, 2022 to now, the market value of the S&P 500 has increased by 16 trillion US dollars
6. Information technology and communications services have the highest returns in the S&P, with Nvidia $NVDA, Microsoft $MSFT, Facebook $META as the leaders. At the same time, the rise of artificial intelligence has also boosted the public utilities sector. Real estate is the only loss-making industry in the S&P 500, and the reason for the loss is the high-interest lending environment.
7. Some people are optimistic and some are pessimistic. According to statistics, the bull market from 1990 to the present, this round of bull market is the last round in 2020, and this round of bull market has basically appeared from the end of 2022 to the beginning of 2023. The interval period has been greatly shortened. At the same time, the growth of sectors in this round of bull market is not balanced, and funds and growth rates are more inclined to technology and communication related sectors.
8. Some analysts believe that the current valuation of US stocks is overvalued and distorted, which is a hidden potential risk, mainly reflected in the "Standard & Poor's equal weight index".
S&P's Equal Weight Index: is an index that gives equal weight to all components of the Standard & Poor's 500. This index also directly reflects the weight balance of all companies in the S&P 500.
According to the four bull markets since 1990, the equal-weighted index will be 15 percentage points higher than the S&P 500 index on average within 20 months of the start of the bull market. However, in this round of bull market since the middle of last year, the equal-weighted index has been 16 percentage points lower than the S&P 500. The extreme gap shows that in this bull market of US stocks, large companies have performed better than small companies, which is not in line with the logic of a normal bull market, and presents a situation of "the strong prevailing". (To be honest, this is similar to the bull market that many people in the current crypto market are talking about, and Bitcoin has gone bullish on its own.)
9. The Kezhouqiujian School once again stated that according to the trend since the early 1950s, if the S&P 500 rose by 10% in June, then the increase in the second half of the year would also reach 10%, which is purely based on historical experience theory.
10. Jeffrey Hirsch, editor of the Stock Trader's Almanac, said that due to the counter-seasonal pattern of the stock market, the S&P may fall 5%-8% in the next few weeks at the beginning of the second half of the year. Don't think this guy is bragging. He is the big shot who successfully predicted the stock market rebound after the financial crisis in 2008.
Most of the content of this report from Bloomberg expresses optimism about the S&P in the second half of the year, but it also warns of possible risks due to the election. Although U.S. stocks closed down in the early hours of Saturday, the first half of the year was still a perfect ending. Whether the second half of the year can continue, or whether the U.S. stock market will start a period of correction and rest at the beginning of the second half of the year, it depends on next week's performance.
At present, if there is a correction in the first few weeks of the second half of the year, according to Jeffrey Hirsch's view, the S&P may have a turning point near MA120, that is, around 5230 (a drop of 4.19%). So, for the crypto market, will the decline during this period be driven by the decline, or will it be able to obtain the overflow liquidity after the decline of US stocks? Let's wait and see.
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