A bull walks into a bar…..

The bull is confronted by a bear who says “what are you doing in my bear market economy?  The bull answered, “looking for AI”.  You are looking for artificial intelligence in a bear market economy? replied the bear.

The eurozone has sunk into recession and some economists fear the United States is next. We’re worrying about rate hikes, inflation, lower spending, layoffs, surging mortgage costs and a war in Europe according to CNN Business. That’s a strange place to find a bull market. “You tend to see bull markets coincide with economic expansions, not economic contractions,” said Sameer Samana, senior global market strategist for Wells Fargo Investment Institute. So why are there bulls running around in a bear economy? It comes down to just two letters: AI.

The Skinny Bull

The S&P 500 rallied June 8^th to end the day in a bull market. The 20% surge since the low reached on October 12, 2022, brought an end to the bear market. Why is it that so many investors do not feel the euphoria usually associated with a bull market?  Enter the Skinny Bull. The S&P’s gains have been carried by a few technology companies. That’s coming to be known as a skinny bull market, and it wouldn’t take much to drag those few names down to undermine the advance. On the other hand, it is possible for this rally to broaden and become more inclusive.

The Generals

LPL Research wrote in its May 30^th market commentary that the Generals, namely Nvidia, Apple, Microsoft, Alphabet, Meta and Amazon were responsible for more than 100% of the S&P 500 returns. Without the Generals, the index would have been down 0.3% as of May 30^th.  There are plenty of studies on bulls and bears, but not on skinny bulls.  Perhaps it’s time we consider a third animal for markets like these.

LPL Tracking # 1-05373203

Sources:

Barrons.com

CNN Financial

LPL Research

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All performance referenced is historical and is no guarantee of future results.

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