Thanks to rampant tech stocks and the AI boom, Wall Street has confidently declared the bear market is over as it declares a bull market. The S&P 500 closed Thursday with a 20% surge from its lowest figure on 12 October 2022.
The surge is attributed to massive gains brought about by big tech stocks, leading the index to surpass the threshold between a bull and bear market with a close at 4,293.93. At least where investors are concerned, optimism and a spike in stock prices are contributing to a buying mood.
Despite media and tech getting a big hit in 2022, observers have said that the markets have withstood losses and have successfully bounced back from what could be told was a catastrophic year for said industries.
Unsurprisingly, the boom in AI has generated interest in technology stocks. After Silicon Valley’s bust last year, Big Tech received a big boost with the onslaught of ChatGPT as the next tech icon, and investors can’t wait to get their hands on it. The rise of generative AI has investors scrambling for stocks on Meta, Apple, Google, Nvidia, Amazon, and others, hoping to cash in on AI.
Several factors are fueling investor optimism, especially as the debt ceiling crisis is over and the Fed is expected to halt rate hikes in its next meeting. Robust economic forecasts are also contributing to the optimism.
While these bode well for the economy, some analysts are still wary about this investor fever. Given that inflation remains high and the labor market is still softening, investors may be wrong. It is true that consumer spending is increasing, but they are reserved for basic necessities and not discretionary expenses. Sameer Samana for the Wells Fargo Investment Institute cautioned that we are “probably heading for a recession” within the year, in contrast with the bull market expectations of Wall Street. However, the markets have a way of surprising everyone and “you never say never,” added Samana.
It’s not a bull, it’s a duck?
Some analysts are reserved about declaring a bull or bear market, instead opting beyond the binary. Schwab senior investment strategist Kevin Gordon is calling it a “duck market” instead, a term that connotes external calm while a lot of “paddling” going on internally.
While tech stocks and AI companies are surging and filling the market’s gaps, other companies are in trouble. Since the S&P 500 is geared toward analyzing big tech companies, enthusiasm around AI is also surging investor confidence, explained Gordon.
Samana cautioned investors to be level-headed and consider current developments as a very tempting bear market rally that will only be short-lived.