Tech stocks Nvidia and Apple have sent the Nasdaq to new heights this year. But some believe the optimism is overdone and a comedown is coming. Video / Cameron Pitney / Getty
United States stock markets are looking euphoric for investors, with the Nasdaq and S&P500 notching record highs this month. However, the handful of technology companies driving it could be cause for concern.
“It’s been a really narrow, concentrated advance,” Salt Funds Management managing director Matt Goodson told Markets with Madison.
“A magnificent seven, or seven horsemen of the apocalypse, whichever way you choose to view them, have really been the key drivers.”
The top 10 stocks on the S&P500 made up about a third of the value of the entire market last week, according to FactSet and CMC Markets.
The top three – Microsoft, Apple and Nvidia – were each worth more than US$3 trillion.
Goodson was “moderately bearish” on US equities and agreed with Morgan Stanley’s chief US strategist Mike Wilson, who said last week that a double-digit correction could occur before the US presidential election in November.
“It’s a perfectly reasonable call,” Goodson said.
“Whichever way you cut it, the US market does look very expensive.”
Added to that, the US economy was “unequivocally slowing”.
“There’s a lot of hype and a lot of momentum.”
Bull v Bear: Some stock analysts are raising concern over the concentration of a few highly valued US technology stocks. Photo / 123RF
While earnings for some companies, such as Nvidia, had been impressive, Goodson was not entirely convinced whether that equated to the valuations at which markets had priced its shares.
“Earnings matter, but there’s been tremendous multiple expansion. Earnings quality can perhaps get just a little bit questionable.”
Of course, they could prove him wrong, if artificial intelligence turned out to be as revolutionary as the internet, he said.
“It could spark rapid future growth.”
Watch Matt Goodson discuss why US equity markets seem unattractive to him, and what could trigger a pullback, in today’s episode of Markets with Madison above.
Get investment insights from executives and experts on Markets with Madison every Monday and Friday here on the NZ Herald, on YouTube and wherever you get your podcasts.
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
