U.S. stocks have had a good year in 2023, and a great start to 2024 with new record highs being set.
Many major indices have recorded double-digit gains. However, some analysts have warned that the rally may not last, as it has been driven by a few large-cap technology and growth stocks, while many other sectors and regions have lagged behind.
A stock market rally is a broad and rapid rise in share prices, often defined as a 20% increase from a recent low.
This could indicate a lack of breadth and sustainability in the rally, and potentially signal a market pullback, correction or even a crash in the future.
Bull bear, bull?
Chartists with their technical analysis might see a pattern that points to a substantial upside, but they should not get too carried away with their own observations, right now would be a sensible time for markets to find level ground, if only temporarily.
The bullish view is that the ‘laggards’ should catch up the ‘mega cap’ stalwarts once again. The bearish view is that the ‘mega cap’ stocks’ will realise they’ve gone too far and need to ride back to the rest of the market. Too few stocks in the same sector hold the balance of power – go check out the Magnificent 7 or even the old FANG stocks.
Catch-up
Either way, there ought to be an opportunity for underrepresented sectors and industries to gain lost ground.
The question is, will there be a pause to allow laggards to catch-up, or will the mega caps simply continue on their march?