The S&P 500 has experienced an unprecedented year, achieving 30 new all-time highs since January. Primarily driven by advancements in artificial intelligence (AI), key stocks such as Nvidia, Broadcom, and Advanced Micro Devices have seen increases of at least 35% in 2023.
AI’s Impact on the Stock Market
The surge of AI stocks has pushed the market into what is referred to as a “manic” rally zone. This trend is reflected by the Bloomberg Intelligence Market Pulse Index, which measures different market conditions, including breadth, stock correlations, and volatility. A reading of at least 0.6 indicates a “manic” state.
Current Market Conditions
The Market Pulse Index has remained above the 0.6 threshold for two consecutive months. According to Bloomberg Intelligence analyst Michael Casper, the market has potential to sustain its manic condition, as it typically takes time to reach a peak.
- 30 new all-time highs for the S&P 500 (SPX) in 2023
- Nvidia, Broadcom, and AMD stocks increased by 35% or more year-to-date
- Bloomberg Intelligence Market Pulse Index reached a reading of 0.6 or higher
Market Outlook
While the recent rally reflects optimism, investors should remain cautious. Historically, the three-month returns following a manic market reading are muted. The S&P 500 has posted a 4.5% return in the last month, influenced by a combination of AI enthusiasm and expectations of interest rate cuts.
As the market evolves, the critical question remains: When will this rally come to an end? As various macroeconomic factors continue to unfold, stakeholders are urged to stay informed to navigate this manic landscape effectively.
