Recently, technology stocks have further strengthened their dominance in the U.S. stock market. "The current market optimism for technology stocks is like the Internet bubble in 1999" - this is the latest view given by Bank of America strategists. In the fourth quarter of last year, a fall in Treasury yields pushed the Nasdaq higher, but over the past four weeks, the situation has changed, with both Treasury yields and the Nasdaq rising.
Bank of America strategist Michael Hartnet and his team wrote in a report that such fluctuations usually only occur after a recession, such as 2009 or the dot-com bubble in 1999.
The strategist team noted that the prevailing mentality is that the economy is expected to remain strong despite tightening monetary policy.
Hartnett pointed out that in fact, investors are not too concerned about whether the Fed cuts interest rates in March or May. They are more concerned about the trend of some key indicators. For example, before the inflation rate picks up again, the market will believe that the Fed's decision is good for asset prices; in addition, if the unemployment rate rises, it may significantly change the macro market environment.
Under the multiple favorable factors of interest rate cut expectations, economic stability, and optimism about artificial intelligence, the "Big Seven" technology stocks led the Nasdaq 100 Index to surge 54% last year.
Now, that rally will extend throughout 2024 as investors continue to bet on big tech stocks. Judging from the performance of the latest earnings season, stronger-than-expected results from Meta and Amazon may provide more momentum. On Friday, U.S. stock time, Meta's stock price soared 20%, and Amazon's stock price also increased by nearly 8%.
In addition, nearly half of the increase in the S&P 500 Index in January this year came from the contribution of the "Big Seven".
Echoing Hartnett's view of the rising dominance of tech stocks, JPMorgan strategist Khuram Chaudhry issued a similar warning earlier this week. Chaudhry believes that the U.S. stock market is increasingly similar to the dot-com bubble period.
Federal Reserve Chairman Jerome Powell this week eliminated market bets on a rate cut in March amid concerns that inflation will remain above the Fed's 2% target.
Hartnett also pointed out in the report that 75% of investors currently expect a soft landing for the U.S. economy, while 20% expect the economy to not land.
The "no landing" scenario means that despite the Fed's sharp interest rate hikes, the economy maintains growth, the labor market is strong, and inflation is difficult to subside.