”Equities continued their clawback from the April lows last month, defying the age-old investor adage “sell in May and go away.” A closer look below the index level reveals that the same big Technology stocks that pulled the index to the brink of bear market territory in April are the ones that helped to pave the path to recovery. The Magnificent 71 cohort alone was responsible for just under half of the S&P 500’s 19% gain since April 8, allowing the cohort to shed the “Lag7” moniker coined earlier this year. The rally was fueled by factors like better-than-expected earnings reports, strong forward-looking guidance, relatively attractive valuations and positioning, and progress on the trade front. While we are constructive on longer-term thematic trends in Technology, we maintain our neutral view in the near term on tariff uncertainty, elevated valuations, a broadening profits cycle, and recent Artificial Intelligence (AI) developments that generated a correction. Investors should consider emphasizing long-term innovation themes as a part of a balanced portfolio while avoiding overexposure to any one area of the market.”
Morten W. Langer
