Traders are starting to worry that the binge won't last long.
This year's U.S. has all but recouped 2022 losses, and some small investors are giving back profits, riskier investments as they consider whether the few tech companies that drive major stock indexes can continue to support the market.
At the moment, traders and Wall Street professionals are worried: just like the economy as a whole, it's doing pretty well, but many can't shake off the fear that the upcoming headwinds will lead to further deterioration.
David Noonan, a full-time trader in Los Gatos, Calif., is one of those worried traders. Over the past year, the 45-year-old investor has been trading options on big tech stocks and popular indices, including the S&P 500 and Nasdaq 100.
Now, with the exception of some Apple IncMost of his assets have been swapped out for cash.
"I just look at where the rates are, and the crowding that we're seeing in these seven giants, and I just have a feeling," he said. If you see people start selling and taking profits, it can have a waterfall effect. "The seven giants are Alphabet Inc, Amazon (Amazon.)com inc.), Apple Inc)、meta platforms inc., Microsoft Corp), NVIDIA Corp) and Tesla (Tesla, Inc). People started locking in gains, which accelerated the sell-off.
The S&P 500 is up nearly 19% year-to-date, and the Nasdaq 100 is up about 46% year-to-date, with some market watchers concerned that the rally is over-inflated and over-reliant on big tech companies. In the recent earnings season, the outlook for giants such as Apple and Meta has disappointed, adding to concerns about future growth potential. In addition, U.S. restrictions on China's access to advanced computer chips could also hurt the operations of tech companies. Not to mention, a recession is still possible in 2024.
According to S&P Global Market Intelligence, retail investors sold nearly $16 billion worth of ** in October, more than in any month in the past two years. Investor interest in several exchange-trading** (ETFs) betting on the tech sector has also declined recently. According to data collected by Bloomberg, ProShares UltraPro QQQ outperformed three times the tech-heavy Nasdaq 100 index. The company's outflows this month have approached $1.5 billion, the highest since January.
*Guaranteed Earnings*
For Gerardo Giusti, the biggest tech companies are still good long-term investments. But the short-term situation is a different story.
The 50-year-old, who lives in Cape Neddick, Maine, is a full-time trader, and his options strategy is often focused on companies like Tesla and Microsoft. But he closed his last tech stock trade the week of Thanksgiving with the aim of securing gains.
"I don't think these companies are going to outperform as well as they have in the past," he said. Their pricing is perfect.
He pointed out that the economic slowdown and volatility around 2024*** could be the reason for a difficult trend next year, especially in the first few months. He plans to invest more in hedging instruments such as cryptocurrencies or cryptocurrencies, as well as potentially cyclical sectors including industrials, materials and energy, which are likely to emerge. His strategy might be a call option on industrial stocks and the iShares Russell 2000 ETF, which is a bet on a certain will. The iShares Russell 2000 ETF focuses on small-cap stocks.
Of course, much depends on the actions of the Fed. At a recent meeting, policymakers said they would "tread carefully" in future interest rate movements. In recent weeks, optimism that interest rate cuts will begin in 2024 has fueled the surge. Giusti said that if the Fed does start cutting interest rates, he may change course and bet on tech stocks to rally sharply.
Meanwhile, Ashton Jones of Jacksonville, Florida, still believes that the rally could continue until the end of the year, with what is often referred to as Santa Claus. But he expects a pullback in January. The 34-year-old, who trades in his spare time as a financial analyst for an insurance company, usually trades options during the day and closes his positions by 4 p.m.
He plans to start shorting the market from January next year to avoid risks.
"When the market is gravity-free like this, there must be," Jones said. Based solely on seasonality, profit-taking can occur.