To The Moon

Keypoints：

• Have You Miss An AI-Driven Driven H1 2023?

• Excessive Optimism? Bear vs. Slow Bull Forecast Reasons Debate

Bull vs Bear Market: What Investors Need to Know | The Motley Fool

Recommend to read: H2 2023 Outlook | S&P 500 Sectors be Focused on & Points Forecast

1. Have You Miss An AI-Driven Driven H1 2023

From the YTD chart below, we can see The $NASDAQ(.IXIC)$ rose over 32% by mid-June, and $S&P 500(.SPX)$ 's 2023 rise reached almost 16% in mid-June before the latest pullback of the past week.

Data as of June 23rd 2023

Looking back, we all witnessed the mega-cap stocks lead the rise of $S&P 500(.SPX)$ due to the wave of AIGC. The whole 11 sectors' performances show a differentiation: The technology sector sees a 33.71% rise, followed by communication services and consumer cyclical sectors with 31% and 21.34% gains respectively. Then the rest of the sectors didn't see a comparison rise.

Data as of June 23rd, 2023

And the performances of top 10 stocks by market value in H12023 are as follow:

Data as of June 20th, 2023

$Apple(AAPL)$, $Microsoft(MSFT)$ , $Alphabet(GOOG)$, $Alphabet(GOOGL)$, $Amazon.com(AMZN)$, $NVIDIA Corp(NVDA)$, $Tesla Motors(TSLA)$, $Berkshire Hathaway(BRK.A)$, $Berkshire Hathaway(BRK.B)$, $Meta Platforms, Inc.(META)$.

In the face of the astonishing gains in U.S. technology stocks in the first half of 2023, investors are very enthusiastic now, also, according to data, fund managers who had waited cautiously have finally come up with positions either.

Citing data from research firm EPFR Global, technology stocks had attracted $19 billion in inflows in the first two months in 2023, and retail investors bought $4.4 billion in stocks in the week that ended last Tuesday, two standard deviations above the 12-month average which jumped to the highest level since April 2022.

At this point in time, as an investor, you may have an interest in how the market situation is, and what factors need to be focused on in H2 2023.

And any stock market forecast for the next six months should take into account the likelihood that rallies get overdone and sell-offs go too far.

Below are some summarize of points collected to help you get a better knowledge about the market and strategy.

2.Excessive Optimism? Bear vs. Slow Bull Forecast Reasons Debate

a. Possible fundamental reasons for the $S&P 500(.SPX)$ to continue its 2023 ascent

The bulls, however, still have good reasons to maintain a positive stock market forecast. Why? The six reasons are as below:

• U.S. core inflation falls. If the core inflation rate falls rapidly, the economic situation may improve, the confidence will be further restored, and the stock market will be further higher. Wall Street already has descriptions of "waiting for Godot" recessions, which are recessions that were expected but never happened.

• Valuation is still the main contribution. Judging from the contribution of valuation and earnings to growth, from mid-March to the end of May, the $NASDAQ(.IXIC)$ index rose by 16.5%, with valuation contributing 13.6% and earnings contributing 2.6%; leading technology stocks In the 32% increase, the valuation contributed 20%, and the profit contributed 10%.

• Better-than-expected earnings of blue-chip companies are conducive to further stock price rises. Federated Herme expects earnings growth to be the catalyst, driving shares higher. According to Yardeni.com, blue-chip companies will see earnings growth of a modest 1.1% this year, accelerating to 11.8% in 2024.

• Two consecutive quarters of gains usually lead to further gains. Since the 1950s, once the index has gained 20% or more, forward returns have typically been very strong, prompting a market turn from bulls to bears, according to LPL Financial (LPLA).

• Based on historical data, once mega-cap out-performance streaks historically, the $S&P 500(.SPX)$ has averaged a 6.7% gain in the six months following.

• Emerging market growth premium remains large, with Asia in focus. It is expected Asia to continue to attract investment flows and benefit from China and India moving towards more sustainable and inclusive long-term growth models.

• VIX hits three-year low. This decline correlates with its correlation component, creating a favorable environment for effective stock picking.

From these perspectives, positive stock market forecasts reflect a more positive overall economic outlook. Fundstrat Global Advisors founder Thomas Lee said,

“With reference to historical trends, investors may have reason to be more optimistic about the market conditions in the next six months. Lee and his team still expect a strong rally in U.S. stocks in the second half of 2023, and see broad market breadth that could push the $S&P 500(.SPX)$ to surge more than 20% for the year, reaching 4,750 by the end of the year.”

b.Fundamental reasons for the $S&P 500(.SPX)$ to decline before the end of the year

However, the surge in US stocks in the first half of the year also increased the risk of price overflow to a certain extent. From the comparison of the growth trend of big technology stocks with other companies in the $S&P 500(.SPX)$ (the figure below), we can see:

• The rally of $S&P 500(.SPX)$ so far has not been supported by market breadth. The remaining performances of 493 constituents in $S&P 500 (.SPX)$ were fair, more than half of the components of the $iShares Russell 2000 ETF(IWM)$ are in negative returns.

• The 2023 Banking Crisis May Not Over. U.S. financial history is riddled with waves of bank closures due to a persistent rise in lending rates and tightening business regulations. Poor action among bank stocks is the main albatross hanging from the necks of The $DJIA(.DJI)$ and the $S&P 500(.SPX)$.

• 2023 has not ushered in a commodity bull market so far. $W&T Offshore(WTI)$ remain in a bear market. (Compared to 2021, oil and gas stocks and metal miners helped lift US stocks, but this year has not yet been the case.)

• Markets were under pressure after the Fed's hawkish stance, with Powell saying in late June that he expected one or two more rate hikes this rest of the year. In addition, the increase in the US debt ceiling will consume liquidity. At the same time, investors are still weighing interest rate hikes by central banks around the world will push the global economy into recession.

• U.S. stocks’ Q2 earnings season expectations are down. FactSet forecasts second-quarter earnings for $S&P 500(.SPX)$ companies down 6.4% from a year earlier. If accurate, it would represent the biggest drop since profits plunged 31.6% at the start of the pandemic.

• The $Cboe Volatility Index(VIX)$ has plunged this year but is still above a 5-year low of 10.2 set Aug. 9, 2018. Sentiment gauges tend to work best at market extremes. When volatility drops to extremes, investors tend to overlook risks and stock markets may top out.

• Technology stocks has also begun to see profit outflows. Outflows from tech stocks hit $2 billion in the week ended Wednesday, the most in the past 10 weeks, according to EPFR Global.

BofA Global Investment Strategy，EPFR

Clearly, the bearish factors have outweighed the bullish ones.

A team led by JPMorgan's chief global market strategist, Marko Kolanovic, warned:

“As the second half of 2023 approaches, the risk of the unknown seems high as U.S. equities could face a sell-off due to some vague and unforeseen catalyst.”

Seeing this, are you more inclined to continue to maintain the bull market in US stocks? Or you support the U.S. stock market will face more risks to a big change?

Please discuss in the comment area. Every valid comments will receive 5 Tiger coins