Commentary
Global benchmark indices delivered mixed results last week, with US equities outperforming their European and Chinese peers. The major deterrence to upwards movement in global equity markets was the US debt-ceiling negotiations, as Republicans and Democrats are still debating what the final deal will look like.
Performance of tech stocks was the major highlight of last week. The tech-heavy Nasdaq 100 gained 3.6%, reaching its highest level in more than a year. Such as positive dynamic is mostly attributed to the surge in AI-related stocks, such as NVIDIA which gained close to 25% last week.
Importantly, equity returns have been extremely contrasting in 2023. The rally of major US benchmarks is predominantly from mega-cap stocks, while their smaller peers struggle to keep up. While Nasdaq 100 has gained more than 30% YTD, Russell 2000 (benchmark for US small-cap equities) is up by a mere 1.3%. Similarly to small-caps, the large and medium-cap stocks also remain stagnant. While S&P MidCap 400 has only gained 1.0% YTD, the S&P 500 equal weighted index (which excludes the market cap effect on the index) has fallen by 0.2% in the same period.
Such a disparity between returns means that the market-wide rebound in equities has not yet taken place. As global macroeconomic sentiment has not yet recovered, investors are still cautious about entering broader equity markets.
