Equity Market Outlook: Mega Caps and Market Drivers

The ongoing narrative is the dominance of mega-cap tech firms in the equity market rally.

### US Mega Caps Continue to Drive Market Rally, with Broader Rallies Expected in Second Half of 2023
* 📈  The equity market rally is still primarily driven by US mega-cap tech companies like **Nvidia and Intel**, resembling the market trend seen in **2023**.
* 🌐  Despite the ongoing dominance of mega caps, there is an expectation for the market's **risk appetite to broaden beyond tech companies** in the second half of the year.
* 📉  The Fed rate cuts and the upcoming US election are adding volatility to the market, but the volatility is not expected to **persist significantly beyond the election**.
* 🇺🇸  While election uncertainties in Europe have dampened investor optimism in the region, the US is seen as a **more favorable market for equities and bonds**.
* 🐂  In the long term, the secular bull run in the US, driven by **technology companies**, is expected to **continue**.
* 💼 " Of course, there are opportunities in other markets, and it always makes sense to **diversify and gain exposure to other regions**.
* 🇺🇸 " However, as a foundational element of a portfolio, we still believe that the **US deserves to be overweighted**.

We're whipsawing a bit on the day SEMA,
but in general Nvidia Intel, some of the chip stocks playing well.
A key part once again is this the ongoing narrative.
It certainly seems to be the case. You know, it's funny because when we
came into the year, the expectation that this would look very, very different to
2023, that you have a broader set of rallies, not just focus on those big
tech companies and then up with six months.
And actually this year looks so much like 2023 where those mega caps are
still carrying the market. I think the one slight difference, which
I think we've got to build on a narrative for the second half of the
year, though, is that whereas, you know, the Mega-cap firms are still expected,
we expect them to continue to do really well.
We are expecting to see that risk appetite and deliberately broaden out
beyond just those tech companies.

So you see some other companies joining in with this positive news. See my head's at in San Francisco, so I'm just back from like a classic July 4th long weekend in the U.S. where we sit around the table and people say, Hey, have you seen a video? Like, what's what's that thing about in video? And then they bring up interest rates and then they brought up the election. But I think the fair thing to say is everyone was kind of asking in financial markets, what is the thing right now that's the main driver or is it a combination of all three? Well. So I think, you know, at the moment, if the equity markets in general, clearly the major driver is still about mega caps in video, the the max seven, they continue to really be those major foundations for the equity market rally. At the same time, you are still seeing some kind of optimism feeding into the market with these expectations.

The Fed rate cuts, which we would certainly agree with, and then with the US election, that's adding volatility. But we do think that volatility would be sustained for much beyond the election. So not something that we continue to be worried about seem to go global because we know you can, and that's why we love you. Look, UK just had elections. France was still trying to work it out. US we have that anxiety is us the place to play for equities and indeed for bonds? Yeah. So the election uncertainty that you've seen unfold in Europe has been somewhat damaging. I think when we think about Europe, investors for the first time in years, actually just about three months ago, started to get really interested in Europe again, started to see some earnings delivery, some slight cyclical upturn, and had become interested. And then what you see now is that this political turmoil seems to unravel some of that optimism that have been feeding

through.
So now we're looking back to the US. Now, obviously the US has its own
election volatility on the rise in the last couple of weeks, and certainly we
would expect that to continue through to November.
But actually when you look out over and another, you know, not just focusing on
the next six months, but really taking more of a long-term perspective, that
secular bull run that you see for the US, which is really built on these
technology companies, we think that that will still be sustained.
So, you know, of course there's opportunities elsewhere.
This always makes sense to diversify and try and get exposure to other markets.
But actually as a foundational element of a portfolio, we still think that the
US is the one that really deserves the overweight.

Stocks Kick Off the Week at All Time Highs

Welcome to the Bloomberg Technology YouTube channel. Subscribe for original series and mini-docs on game-changing technologies, profiles on innovators, live conversations with experts, and breaking technology news & analysis from Bloomberg TV.

Bloomberg Technology

The stock market is still heavily influenced by mega-cap tech companies like Nvidia and Intel.

There is a hope for a broader rally in the second half of the year, expanding beyond just the tech giants.

Overall, the major driving force behind the equity market rally remains the mega-cap firms, but there is also optimism for other companies to contribute to the positive trend.

The Impact of Fed Rate Cuts and Global Elections on Market Volatility

Fed rate cuts and the US election are increasing market volatility, but it is not expected to last long after the election.

The political turmoil in Europe is damaging investor optimism that had been building up for the past few months, especially regarding the potential for economic growth and earnings delivery in the region.

The uncertainty caused by the elections in the US and Europe is impacting the attractiveness of equities and bonds for investors.

The US Election Volatility and Long-Term Investment in Technology

The US is experiencing increasing election volatility, expected to continue until November.

Despite opportunities in other markets, a long-term perspective suggests that the secular bull run of US technology companies will persist, making the US a foundational element for investment portfolios.