“It’s an unbelievably concentrated market rally,” Page said. Market narrowness is at extremes and the five biggest stocks in the index, notably all of them tech names, now make up nearly a quarter of the index by market cap. The S&P 500 is teetering on bull market territory but May saw more stocks hit 52-week lows than 52-week highs. Some are also skeptical a rally built around megacap stocks can endure. “These assets look really cheap and this is an opportunity to lean in when no one else is ready yet.” “Right now, the pulse is more toward a soft landing,” Page said in an interview. Sebastien Page, chief investment officer at $1.35 trillion asset manager T Rowe Price has been snapping up small-cap stocks on a view that markets are overestimating recession risks.
#SLACK TECH STOCK DRIVER#
That’s because they believe expectations of US recession and interest rate cuts - a powerful driver for tech stocks - are way overdone. This week’s rally in the Russell 2000 has surpassed moves in the Nasdaq by nearly 5% as a growing band of investors wager that beaten-down cyclicals will reap greater future reward than frothy tech. Nonetheless, small caps are beginning to regain ground. To illustrate the divergence, a $1000 investment made on January 1 on the Nasdaq would have earned a return of $330, while a similar amount placed on the Russell index would have earned - nothing.
With record investment flows, these stocks have led the Nasdaq 100 benchmark to its biggest ever outperformance against the Russell 2000 small-cap share index.
Such stocks have been elbowed out of the way in recent months by the stampede for AI-linked stocks such as Nvidia Corp.
But they contend that’s not bad news for the market because so-called cyclicals - ‘old economy’ companies such as banking and mining - are primed for a rebound. are among those who reckon the hype around all things artificial intelligence is topping out. T Rowe Price Group Inc., Bank of America Corp. (Bloomberg) - For all the frenzy around AI, there’s a quiet investor backlash building against the tech oligarchy’s recent stock market run.
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