BUZZ Investing: New Bull Market

Seven tech stocks accounted for almost 75% of the S&P 500’s year-to-date gains, marking the technical start of a new bull market, even as investors raised concerns about narrow market breadth.

Domestic equities extended their year-to-date gains during the recent period between Index selection dates (June 8, 2023, to July 13, 2023, the “Period”). Growth was led by shares of technology-oriented companies, reflecting investors’ continued enthusiasm toward AI-driven narratives. Notably, the S&P 500 Index surpassed a 20% increase from its October 12th closing low, signaling the technical start of a new bull market. Some investors raised concerns about the narrow breadth exhibited in the market, cautioning that it may indicate an impending reversal for stocks. Historical instances of market breadth acting as a leading indicator may lend credence to their viewpoint. Interestingly, most of the gains in the S&P 500 Index this year can be attributed to just seven stocks: Apple Inc (NASD: AAPL), Microsoft Corp (NASD: MSFT), NVIDIA Corp (NASD: NVDA), Amazon.com Inc (NASD: AMZN), Meta Platforms Inc (NASD: META), Tesla Inc (NASD: TSLA), and Alphabet Inc (NASD: GOOGL/GOOL). These stocks have accounted for almost 75% of the index’s year-to-date gains and now comprise nearly 25% of the index’s total market capitalization.

The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”) returned 6.77% during the month of June compared to a return of 6.61% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index leads the S&P 500 with returns of 35.39% and 16.89%, respectively, as of the end of June.

Shares of Coinbase Global Pace Advancing Stocks within the BUZZ Index

Shares of Coinbase Global Inc (NASD: COIN) paced advancing stocks within the BUZZ Index during the recent Period. COIN, which operates a platform to buy and sell cryptocurrencies and serves clients worldwide, saw its shares rise 94.9% during the Period. COIN’s extraordinary performance is primarily attributed to a range of factors, including Bitcoin and other cryptos bouncing back from a 2022 downturn, Wall Street giant BlackRock and other firms filing for ‘spot’ Bitcoin ETFs, boosting investor morale, and a critical legal victory for Ripple Labs against an SEC suit alleging their XRP should be considered a security for regulatory purposes. The Ripple Labs victory was viewed by many as a positive precedent for similar cases, including Coinbase’s, further propelling sentiment across the crypto sector. A range of other technology and AI-related companies continued to positively contribute to index performance, as the prospects for growth within the segment continue to be a primary focus for many investors.

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

The top ten detractors to performance combined for just 82 basis points of negative returns within the index during the Period. The top detractors to performance were observed from stocks across a range of industry sectors, including Communication Services, Consumer Discretionary, Consumer Staples, Financials, Health Care, and Information Technology. Notable among detractors were shares of Advanced Micro Devices Inc (NASD: AMD), which has failed to keep pace among AI-related chipmakers within the industry. While shares of AMD were up an impressive 79% year-to-date, the gains pale in comparison to industry leader NVIDIA Corp (NASD: NVDA), whose shares have gained nearly 215% during 2023.

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

Sentiment Stock Highlight – Cryptocurrency Related Stocks

Investor sentiment for the crypto industry has taken a positive turn in recent months, highlighted by Blackrock’s filing for a spot Bitcoin ETF on June 15th, which, if approved, may potentially allow billions of dollars of capital to be invested in the popular cryptocurrency. Other companies have made numerous attempts at a ‘spot’ Bitcoin ETF in the past, with no success. Blackrock’s status as the world’s largest asset manager makes its attempt the most prominent potential entrant, and many market commentators are hopeful its efforts will succeed. Crypto exchanges such as Coinbase Global Inc (NASDAQ: COIN), and trading platforms that offer crypto trading, such as Robinhood Markets, Inc. (NASDAQ: HOOD), may stand to benefit from regulatory approval of a ‘spot’ Bitcoin ETF. Further tailwinds in the cryptocurrency space emerged when a judge from the Southern District of New York declared Ripple Labs’ XRP token was not a security for regulatory purposes. The announcement was a surprise and sent prices of many crypto-related assets soaring across the board. COIN jumped 30% on the news, bringing its total gain over the Period nearly 95%. HOOD, a popular stock amongst the ‘Reddit’ investment community, had the most notable sentiment increase last month, as investors are betting on the stock as a proxy for the improving boarder crypto landscape. HOOD shares are up over 30% in the recent period between Index selection dates, and the boost in sentiment pushed its weight up to 2.15% in the July Index rebalance, up from 0.88% last month.

Robinhood Markets Stock Price | July 2022 – July 2023

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

BUZZ Index July 2023 Rebalance Highlights

Joby Aviation

2020 was the year the SPAC market was thrust into the spotlight for the broad investor community. Many investors had been previously unaware of the asset class until several companies were brought public via qualifying transactions (de-SPACs) and surged in price. Beginning in 2021, the market lost steam amidst the rising interest rate environment. Many of the most popular de-SPACs, including Virgin Galactic (NYSE: SPCE), DraftKings (NASDAQ: DKNG), and Nikola Corp (NASDAQ: NKLA), declined over 80%. Many de-SPAC stocks are still down significantly; however, a few have begun to rebound. The most notable in recent months has been Joby Aviation (NYSE: JOBY), the “flying electric taxi” company that went public via a merger with Reinvent Technology Partners, a SPAC led by the co-founder of LinkedIn, Reid Hoffman, and the founder of Zynga, Mark Pincus. On June 28th, Joby announced that it had completed its first production prototype and received FAA approval for test flights, along with a further $100MM investment from SK Telecom, an existing investor. The news sent shares of JOBY up over 40%. Investor sentiment on the stock has been rising in recent months and surged following the company’s latest developments. This month, JOBY entered the BUZZ Index for the first time ever, with a 0.85% weight.

For more on rebalancing results and a full breakdown of index constituents added and removed for the month, view the BUZZ Index reconstitution report.

Originally published by VanEck on July 25, 2023.

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