S&P 500 Soars to Best May in Years, Led by Tech Giants
The S&P 500 has just wrapped up its best May in years, with a near 4% gain that marked its strongest performance for the month since 2009. However, the rally was highly concentrated in just a handful of stocks, particularly the six trillion-dollar tech companies that have been dominating the market.
According to FactSet data, the S&P 500’s gains in May were largely driven by the biggest tech giants, including Microsoft, Apple, Nvidia, Alphabet, Amazon, and Meta. These six companies, often referred to as the “magnificent seven” before Tesla fell out of favor, accounted for a staggering 76% of the index’s total gains this month.
Investors in individual companies experienced an uneven month, with the S&P 500 outperforming the equal-weighted S&P 500 for the fifth consecutive month of 2024. The equal-weighted S&P rose just 1% in May, highlighting the dominance of larger companies in driving the market’s performance.
While the top tech stocks have been leading the charge, it’s important to note the disparity in returns for investors. Those who invested in the mega-cap tech companies at the beginning of last year would have seen significant gains, while investments in the broader S&P 500 or the equal-weighted S&P 500 would have yielded lower returns.
The market’s recovery over the past year-and-a-half has been fueled by optimism around declining inflation and the potential for lower interest rates, particularly benefiting tech stocks with strong AI capabilities. Nvidia, in particular, has seen a significant increase in profits thanks to the high demand for its AI technology.
Despite the strong performance in May, the market’s success defies the traditional wisdom of “sell in May and go away,” which suggests that stocks tend to underperform in the summer months.
Overall, the S&P 500’s recent surge highlights the dominance of tech giants in driving market gains and underscores the importance of diversification for investors looking to navigate the market’s ups and downs.
