According to a recent report by DataTrek Research, despite the S&P 500 achieving a new record high on Friday, the overall market rally has not been evenly distributed across sectors. DataTrek assessed the performance of different sectors over the approximately two-year period leading up to January 19, comparing it to the index’s previous peak on January 3, 2022. In a note sent on Monday, Nicholas Colas, co-founder of DataTrek, observed, “The surge in the market to new highs has been discerning, with only three groups displaying gains since the S&P’s last peak in early 2022.” The sectors experiencing growth from the index’s previous record high in 2022 to its recent peak on Friday were energy, technology, and industrials. Among these, energy saw the most substantial gains, around 40%, with technology standing out, according to DataTrek. It’s worth noting that information technology carries the largest weight in the S&P 500, making up about 30%, according to FactSet data. Colas downplayed the significance of the energy sector’s rise, stating that its small weighting in the index, currently at 3.7%, renders it largely inconsequential. He explained, “Energy was in a slump two years ago, so its gains are understandable.” DataTrek highlighted the outstanding performance of two mega-cap companies, Nvidia Corp. and Microsoft Corp., both reaching new highs on Friday within the S&P 500’s technology sector. Colas emphasized their impact, stating, “These two names account for 1.1 percentage points of the S&P 500’s 1.5% gain year to date. Without them, the index would not have reached its record close on Friday.” The report also focused on the seven Big Tech stocks, including Apple Inc., Amazon.com Inc., Google parent Alphabet Inc., Facebook parent Meta Platforms Inc., and Tesla Inc. While five of these stocks contributed to the S&P 500’s 0.9% rise from January 3, 2022, through Friday, Amazon and Tesla saw declines over the same period. Colas concluded on an optimistic note, drawing a parallel between the unexpected success of ChatGPT in 2022 and the promising breakout in the stock market on Friday. He expressed bullish sentiments, viewing the breakout as a positive signal for the future. As of Monday afternoon, the U.S. stock market showed gains, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all posting increases, driven by advances in industrials and technology sectors.

The decision by Ron DeSantis to withdraw from the Republican presidential race highlights the potential impact of elections on financial markets, especially considering the upcoming political events in the U.S., India, Mexico, and likely the U.K. this year. Citi’s strategists analyzed the market effects of 134 elections across 17 countries, excluding periods of global market volatility such as the financial crisis and the COVID-19 pandemic. Contrary to expectations, their findings suggest that elections generally do not have a significant influence. Developed market equities experience some volatility around election day but typically maintain a mild upward trajectory before and after the polls. Specifically in the U.S., equity markets tend to show an upward trend leading into elections, with a continued ascent afterward. Sectors tied to economic cycles, in particular, tend to perform well post-election. Although volatility, as measured by the VIX, increases during election periods, it tends to subside later. A noteworthy finding is that while markets generally favor continuity, they adapt to “change” elections where policies undergo a shift, albeit with a delay of around four to five months. Initially, right-leaning parties are preferred, but after about five months, markets adjust positively to left-leaning parties, which tend to perform better after six months. In emerging markets, equities often decline leading up to elections and then experience an upswing afterward. The markets with upcoming elections this year show mixed results. Indonesia, Taiwan, and South Africa tend to see positive trends six months post-election day, while India and Mexico show a tendency to trade somewhat lower. Emerging markets typically lean towards favoring change over continuity candidates. Despite prevailing political uncertainties, the S&P 500 has demonstrated resilience, recording a 1% gain this year and achieving a record high on Friday. Over the past 52 weeks, the index has posted a notable 22% increase.