2024 Week 25

1. US Large Cap Domination

Positive Framing: The S&P 500 continues to show significant outperformance over small caps (Russell 2000), hitting its most extreme level of dominance since November 1999. This reflects strong investor confidence in large-cap companies, driven by robust earnings and resilient business models. Investors have favored stability and proven track records, which large caps offer in abundance.

Negative Framing: The extreme outperformance of large caps may signal an overconcentration risk, reminiscent of market conditions before the 2000 dot-com bubble burst. Historically, such extreme disparities tend to revert to the mean, potentially indicating a looming correction in large-cap stocks.

2. Nvidia Becomes World's Largest Company

Positive Framing: Nvidia's market cap surged to $3.33 trillion, surpassing both Apple and Microsoft. This milestone highlights Nvidia's remarkable growth and the increasing importance of AI and data center technologies. It showcases the limitless potential within the tech sector, encouraging continued investment and innovation.

Negative Framing: The rapid rise in Nvidia's market cap might raise concerns about overvaluation. Such exponential growth could be unsustainable, and any setbacks in AI advancements or increased regulatory scrutiny could significantly impact its stock performance.

3. Growth Stock Investors Partying Like It’s 2000

Growth stocks have been on a tear, with their outperformance over value stocks reaching levels not seen since July 2000. This reflects strong earnings growth and investor optimism about future prospects. Companies in tech and innovation sectors are leading the charge, attracting substantial investment.

4. Historic US Outperformance

US stocks have consistently outperformed international markets, with the S&P 500 reaching new highs. This reflects the strength and resilience of the US economy, underpinned by robust corporate earnings, innovation, and a favorable regulatory environment.

5. Key Events to Watch This Week

Economic Data Releases:

• June 21: US Existing Home Sales data for May.
• June 22: Initial Jobless Claims.
• June 23: Durable Goods Orders for May.
• June 27: Consumer Confidence Index for June.

Earnings Reports:

• June 22: FedEx Corporation (FDX).
• June 23: Nike Inc. (NKE).

6. Technical Analysis Highlights

S&P 500:

• Support Levels: 4,300 and 4,250.
• Resistance Levels: 4,500 and 4,550.
• The index is trading above its 50-day and 200-day moving averages, indicating a strong bullish trend.

Russell 2000:

• Support Levels: 1,800 and 1,750.
• Resistance Levels: 1,950 and 2,000.
• The index remains below its 200-day moving average, suggesting relative weakness compared to large caps.

7. Fundamental Analysis Highlights

Nvidia (NVDA): Nvidia's rise to a $3.33 trillion market cap underscores its dominance in the AI and data center markets. Investors should be mindful of potential regulatory challenges and market saturation risks, which could affect its stock performance.

Growth vs. Value Stocks: The historical pattern of growth stocks outpacing value stocks may not be sustainable. As seen in past cycles, such disparities often lead to market corrections, where value stocks gain while growth stocks face declines.