Traders celebrating a record-setting day of shorting volatility.Reuters / Charles Platiau
The stock market’s once-in-a-generation buy opportunity is approaching, RBA said.
The investment firm pointed to expectations for anemic big tech earnings over the next year.
The tech bubble bursting means other areas of the market could see gains as leadership evens out.
Bearish signals are flashing for the market’s hottest group of stocks, and it’s a sign that a can’t-miss investment opportunity is on the horizon, according to Richard Bernstein Advisors.
The investment firm has been saying for months that a once-in-a-generation opportunity is coming, and it could finally be close at hand, RBA deputy CIO Dan Suzuki said.
The thesis, which the firm first proposed at the end of last year, hinges on the extreme market leadership of a handful of stocks broadening out to the wider market, with stronger gains coming for the other 493 names in the S&P 500 following a dominant stretch for the so-called Magnificent Seven.
While tech stocks have taken an outsize share of the gains in the market over the last 15 years, corporate earnings for big tech firms are set to decelerate over the next quarter, Suzuki said.
Of the Magnificent Seven – Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta Platforms – only three are expected to have more than 25% earnings growth in 2024, RBA said in a recent note.
Only three Magnificent Seven stocks are slated to post more than 25% earnings growth this year.Richard Bernstein Advisors
That differs from areas like small caps, industrials, energy, and emerging markets stocks, where earnings are expected to accelerate in the coming year.
Meanwhile, valuations and investor concentration in mega-cap tech firms are looking extreme, even more so than what was seen in previous stock market bubbles, according to Suzuki. The top 10 stocks in the S&P 500 now take up over 30% of the index’s total market cap, the largest share seen in over 40 years:
The top 10 stocks in the S&P 500 account for the largest share of the index’s market cap in over 40…
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