The rally in US equities over the last 3 months (+16.4%) was partly a function of growing confidence in peak rates and anticipation of an easing cycle. It was also due to the continued outperformance of the technology stocks.
Exhibit 1: The 16.4% return over the last few months compares with an aggregate return of 27.4% since the start of last year.
Exhibit 2: The Technology sectors have dominated the sector weighted contribution to aggregate returns over the last 3 months
However, the profile of returns within the technology sector is not homogeneous
In Exhibit 3 we show that the Semiconductor sector contributed almost 85% of the aggregate Technology sector return over the last 3 months – leaving most other tech subsectors in its wake.
Exhibit 3: The technology sector returns have been dominated by the semiconductor sector
Over the last 3 months the Magnificent 7 stocks contributed around 25% of the aggregate market return of 16.4%. However, these returns were dominated by the contribution from just two stocks - Nvidia and Microsoft (the AI play within the Mag 7).
Exhibit 4: The Magnificent 7 stock weighted contribution to aggregate market return over the last 3 months
