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The bulls are back
Optimism among market participants appears to have re-captured the stock market once again.
Despite the challenges faced in recent months, such as the surge in inflation, equity markets have managed to overlook concerns of a recession and interest rate scares. The US stock market has displayed impressive resilience, even amid recent difficulties like the banking crisis that triggered panic in the sector. Not only is the US economy growing, but its primary indicator, the S&P 500, has surpassed its pre-hiking levels of March 16th, 2022. This suggests a resurgence of bullish sentiment among investors.
New bull market
S&P 500 entered a bull market this month, up over 20% since the October lows of last year. Since the 1920s, bull markets have lasted for 1011 days on average, roughly three times longer than bear markets over the same period. Additionally, over the last century, bull market returns were substantially higher, producing a 114% return on average, compared to a -25% return during bear markets. Unsurprisingly, as a result, investors who bet on the US economy’s success win in the long run.
Is this time different?
However, this bull market might be different. It is no secret that seven big tech-heavy hitters are fuelling this rally and carrying the S&P 500 index up.
The performance of the S&P 500 index is now the most concentrated it has been since the covid-19 days. Seven of the biggest constituents — Apple, Microsoft, Google owner Alphabet, Amazon, Nvidia, Tesla, and Meta or the “Magnificent Seven” have surged between 40 percent and 180 percent this year, in contrast to the remaining 493 companies, whose aggregate performance is essentially flat.
Tech dominance in recent months has become mind-blowing; just 5 of those tech companies account for 25% of the market cap of the entire index. Apple, for instance, at nearly $3 trillion, not only has the largest weight in the S&P 500 but is worth more than the combined value of all the 2000 companies in the entire Russell 2000 index!
Nividia is another example of bubbly valuation. The company gained over $640B in market cap this year, as investors’ enthusiasm about AI has propelled $NVDA through the $1 trillion market cap threshold.
However, underneath the surface, as investors pile into a handful of stocks, this is masking some broader market weakness. The overconcentration has caused some serious valuation worries. Prices seem to be racing ahead of future earnings, making multiple valuations detached from reality. Look at how the “Big 7” Price to earnings is north of eye-water 30, while the rest S&P 500 hovers around 15. And if we zoom in at those seven tech giants, we will see even more distortions. Nvidia has Price to sales = 40, while the rest, except for Microsoft, are trading below 10, as the AI mania leads to market dislocations.
On top of that, that craze for stock might have fuelled a fear of missing out (FOMO) rally among equity traders, further exacerbating the valuation metrics distortion.
In essence, the big tech titans are carrying this market, along with rate cuts hopes. The latter might not happen this year, as interest rate traders have priced out lower Fed rates.
This looks very reminiscent of a tech 2.0 bubble. There is a lot of noise in the markets, but one thing is clear valuations are mean reverting. Hence, the question is not if but when they will come down to earth.
Investors can long the S&P 500 or any of the magnificent seven members using our 3x US 500 , 5x Long US 500 , 1x Apple , 2x Apple, 3x Apple , 1x Microsoft , 2x Microsoft , 3x Microsoft , 1x Alphabet , 2x Alphabet , 3x Alphabet , 1x Amazon , 2x Amazon , 3x Amazon , 2x NVIDIA , 3x NVIDIA , 1x Tesla , 2x Tesla , 3x Tesla , 1x Facebook , 2x Facebook , 3x Facebook products respectively.
Alternatively, investors can short the S&P 500, any of the magnificent seven members using our -3x US 500 , -1x Apple, -3x US 500, -1x Apple , -3x Apple , -1x Microsoft , -3x Microsoft , -1x Alphabet , -3x Alphabet , -1x Amazon , -3x Amazon , -1x NVIDIA , -3x NVIDIA , -1x Tesla, -2x Tesla , -3x Tesla , -1x Facebook , -3x Facebook products respectively.
Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
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The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
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Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
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Terms and Conditions
Notice
If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
United States Visitors
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
Persons accessing this website in the European Economic Area
Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Exclusion of Liability
Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
Leverage Investment
Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.
Cookies
Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.
This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2.
By clicking you agree to the Terms and Conditions displayed.
