The tech-heavy stock exchange Nasdaq has experienced a remarkable first half of the year, achieving a nearly 40% gain. The impressive rally was primarily driven by the performance of major technology companies and the growing excitement surrounding artificial intelligence (AI). The huge market cap tech race is gaining traction like never before with Apple hitting the $3 trillion mark.
Nasdaq’s spectacular first half raises optimism and concerns
The Nasdaq index has had an outstanding first half of the year, marking its third-best performance since 1972. After enduring significant losses in 2022, when it fell by over 30%, the technology-heavy index rebounded impressively, gaining nearly 30% in the first half of 2023. However, analysts and investors are now cautiously examining what lies ahead for the second half.
While historical data suggests that Nasdaq tends to perform better in the first half, with an average 7% gain, when the first half delivers gains of 29% or more, the second half tends to see an average drop of 11%. This pattern raises questions about whether the momentum can be sustained in the coming months.
One intriguing aspect of Nasdaq’s performance this year is the dominance of a few large-cap stocks, often referred to as the “Big Seven.” Companies like Tesla, Meta, Nvidia, Apple, Microsoft, Alphabet, and Amazon have played a crucial role in driving the index’s gains. If these industry leaders manage to lift other companies, it could lead to a broader market rally.
Additionally, while the number of positive trading days for the Nasdaq during the first half has been relatively low compared to historical averages, this could be interpreted as a positive sign. According to Bespoke Investment Group, a reduced number of positive trading days during the first half has typically signaled a continuation of the rally into the second half.
The driving force behind the impressive performance of the Big Seven and the broader Nasdaq index can largely be attributed to the hype surrounding artificial intelligence. AI technology has the potential to revolutionize various industries and drive future earnings growth. Experts believe this trend will continue, contributing to the sustained market momentum.
Fidelity Investments seeks approval for spot Bitcoin ETF
In addition to Nasdaq’s remarkable performance, Fidelity Investments is making another attempt to launch a spot Bitcoin exchange-traded fund (ETF). Following the footsteps of BlackRock and Invesco, Fidelity aims to address the Securities and Exchange Commission’s (SEC) concerns about surveillance and potential manipulation in cryptocurrency trading.
The SEC has previously rejected applications for spot Bitcoin ETFs, citing inadequate surveillance measures on the platforms that facilitate Bitcoin trading. However, Fidelity’s application emphasizes the establishment of a surveillance agreement between Nasdaq and a crypto trading platform to detect and prevent fraudulent activities.
Fidelity’s foray into the digital asset space extends beyond ETFs. The investment firm has been embracing digital assets over the past two years, offering Bitcoin investment options in retirement plans through 401(k) plan sponsors and operating its cryptocurrency brokerage. The approval of a spot Bitcoin ETF could provide further legitimacy to the crypto market and potentially impact the price of Bitcoin positively.
Nasdaq’s exceptional performance in the first half of the year, driven by the impressive gains of leading technology companies and the rising enthusiasm for AI, has created a sense of optimism in the market. While concerns about valuations and the narrow breadth of the rally persist, experts remain optimistic about the potential of AI to drive future earnings growth.
Additionally, Fidelity Investments’ application for a spot Bitcoin ETF underscores the growing interest in cryptocurrencies among institutional investors. The approval of such an ETF would provide investors with more accessible avenues for exposure to Bitcoin, potentially influencing the market positively.
As the market enters the second half of the year, investors will closely monitor the sustainability of the rally and the impact of emerging technologies like AI on corporate earnings and market sentiment.
