A New Bull Market Has Arrived

Bull and bear statues are pictured outside Frankfurt's stock exchange in Frankfurt, Germany
Credit: Ralph Orlowski - Reuters /

On Friday, with a gain of 2% for the week, the tech-heavy Nasdaq Composite Index booked its sixth straight week of gains. This marked the index’s longest weekly winning streak since 2020, driven by Q1 earnings results from major tech heavyweights like Nvidia (NVDA), Apple (AAPL), Amazon (AMZN), Tesla (TSLA) and Meta Platform (META). For the week, the Dow Jones Industrial Average added 2%, while the S&P 500 Index gained 1.8%.

On a year-to-date basis, the gains are even more pronounced. The Nasdaq has risen 27.47%, compared with a 2022 decline of 34%. The S&P 500 is up 12%, while the Dow, after rising 701.19 points, or 2.12%, to end Friday’s session at 33,762.76, has added a modest gain of 1.89% on the year. Friday’s 700 point jump was the Dow’s best day of the year. Meanwhile, Nvidia, which has soared 172% this year, has helped the Nasdaq to outpace the S&P 500 and Dow so far in 2023.

All of this points to something no one is talking about or is afraid to say: a new bull market is upon us. The collective optimism and the reasons for the year-to-date increases can be attributed to several factors. Investors are applauding the earnings results companies have reported thus far. It’s no longer just a matter of accepting “less bad” results. The “glass-half-full” mindset is over. It has been replaced by strong growth expectations, and companies have delivered.

The forward guidance have been more than encouraging, suggesting CEOs are feeling increased confidence in their ability to navigate inflationary headwinds. This was a major takeaway in Nvidia’s Q1 earnings, during which the company raised its guidance suggesting demand for technologies powering artificial intelligence workloads. Citing strong demand for its GPUs that power AI applications like the ones at Google, Microsoft and ChatGPT maker OpenAI, Nvidia guided for revenue of $11 billion for Q2.

The company’s Q2 forecast blew away Wall Street estimates by more than 50% above the $7.15 billion revenue expected, which suggests that all of the AI craze is more than hype. Established tech companies and startups are scrambling to build out their AI platforms, causing a surge in enterprise demand for GPUs. As a result, Nvidia saw its shares rocket up 26% following its blowout results, bringing its market value to $1 trillion.

Nvidia is now the fifth publicly traded U.S. company to have reached the $1 trillion valuation, joining Apple, Microsoft (MSFT), Google parent Alphabet (GOOG , GOOGL) and Amazon. Meanwhile, there is Tesla. After shares of the electric vehicle company surged 11% for the week, the stock is now up a stunning 74% for the year. This is a remarkable turnaround considering the stock lost roughly two-thirds of its value in 2022. Once seen as a head-scratcher, the company’s strategic and timely price cuts is now showing to have given it a possible market share advantage.

With the Q1 reporting cycle now over, the results area in. Tech stocks have had a strong start to the second half of the year, driven by optimism that the Federal Reserve is close to the end of its rate hike cycle. Higher interest rates, slower growth, and softer labor market conditions has brought down inflation. Surprisingly, the pain that this scenario was expected to bring to households and businesses has been less pronounced than expected thus far.

Combined with the relief over the U.S. debt ceiling, and dampening inflation risk, the market itself has already pivoted from a bear mindset to bull mindset. And it's more than likely that stocks, particularly the mega-cap techs mentioned here, will continue to post strong returns for the remainder of the year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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