Once again, we have another winning month in the stock market. The broad markets advanced roughly 2% in February as the bull market continues. However, we are still seeing signs of waning momentum outside of a few red-hot sectors. Fewer and fewer stocks are going up in price, but the indices were still able to muster gains as behemoths such as Nvidia lifted entire markets after their monster quarterly results were released. We are cautious, but not yet bearish because the Dow continues advancing. An old saying on Wall Street is, “Don’t fight Papa Dow.” Until we see more strength from previous market leaders, we will remain cautious but still expect to see positive market returns.
Apple, Google, and Microsoft were all unable to post gains for the month, taking a breather after outsized returns over the past year. Google had the toughest month down more than 10%, but much of that was due to backlash over some of the content coming out of their generative AI tech, Gemini. It will be hard to see significant moves higher in the Nasdaq and S&P without these big three participating. In fact, it has been impressive watching diversified portfolios holding so strong and advancing with such few numbers of stocks making new highs. However, some of those new highs have been very high indeed, and that has helped. Semiconductors have been ripping higher as have drug manufacturers and biotech. Nvidia has advanced more than 230% in just this last year, and not to be outdone, chip manufacturer, Super Micro Computer has jumped a whopping 700% in that time. The AI revolution in computation is truly upon us and data centers the world over will have to upgrade their chips. In other industries, drug manufacturers are once again having their day in the sun as weight loss and diabetes drugs are taking the world by storm. Profits have been soaring as many consumers believe the holy grail of lifestyle drugs is upon us: the do nothing, eat whatever you want, and remain healthy drug.
It's true we are only seeing a handful of stocks making new highs, but there is something we are not seeing that tells us the bull has permission to march on – new lows. Mathematically, it is impossible for us to have a stock market correction without stock prices falling. So, for any bears out there, or stock market naysayers saying the top is here and the bubble is bursting, they might be right at some point but just not quite yet. Volatility is bound to pick up and the economy might get messier, but until we see more stocks falling and making new lows relative to where they were a week or month or year ago, we will remain cautiously optimistic that the bull market will continue.