This Stock Boom Doesn't Need the Mega-Caps: Schwab Trading Pro
Schwab clients are being selective and not suffering from FOMO, Joe Mazzola says
The stock market rally can continue even without the mega-cap tech stocks, a top Charles Schwab expert said Monday.
Seven major tech stocks — Nvidia, Meta, Apple, Amazon, Microsoft, Alphabet and Tesla — have led the months-long stock market rally, accounting for nearly 30% of the S&P 500 index at year-end 2023.
While not referencing this so-called Magnificent 7 group specifically, Joe Mazzola, Schwab’s director of trading services education, suggested on CNBC’s “Squawk Box” that the stock market boom can persist without the mega-caps.
Schwab sees that its investors have shifted a bit more toward “the chips,” he said. “So the big guys that we saw” — Nvidia, Advanced Micro Devices, Super Micro Computer, Arm Holdings — “they’re trying to ride that momentum, that AI momentum. How long that lasts we’ll see, but they’ve been successful so far.”
Schwab clients are long, buying dips, buying equities but they’re not “levering up” through activities like dipping into margins, buying levered ETFs or engaging in high call activity in the options market, Mazzola said.
“We’re not seeing FOMO with our clients at this point,” he said. “What we’re seeing is they’re long the market, they’re selective in their buying and they’re choosing information technology. That’s the sector that they’re really hitting up right now.”
Regarding the strong market trend, he said, investors are feeling more confident but “they’re selective in their buying, they’re not buying across the board.” The market appears to be in the “belief” rather than the “reach” phase, Mazzola said.
While it’s wise not to reach and lever up in this market, it probably makes sense to look for some hedging, Mazzola said, citing market all-time highs, divergence and flattening breadth.
Image: Adobe Stock