Investors eager to buy into the stock market rally may want to hold off, according to an analyst for Canadian investment bank Canaccord Genuity. The S & P 500 and Nasdaq Composite closed at all-time highs on Monday, adding to strong gains in the first half of the year. The tech-heavy Nasdaq ended the first half up 18.1%, while the S & P rose 14.5% and the Dow Jones Industrial Average gained 3.8%. Expectations that the economy and corporate earnings will keep growing, and excitement over artificial intelligence, helped fuel the rally. .SPX YTD mountain S & P 500 year to date While history shows S & P 500 gains of 10% to 15% in the first half lead to further upside in the second half, investors should be patient, Canaccord Genuity’s Michael Welch said in a July market strategy report released Monday. “We believe (1) the high bar for Q2 earnings; (2) underperformance of the average stock; and (3) the potential for volatility heading into the Presidential election, may provide a better opportunity for buying on a near-term pullback rather than chasing new highs,” he wrote. The stock market’s strength since last October has been dominated by mega-cap tech stocks, he pointed out. In fact, the top 10 stocks in the S & P now account for over 38% of the index’s total capitalization — a new high, Welch said. That led to the largest underperformance on record of the S & P 500 Equal-Weighted Index and the Russell 2000 Index of small cap stocks in the first half of the year, Welch noted. Meanwhile, the S & P 500 is trading at a rich multiple of 24 times trailing 12-month profits, and expectations are for 10.1% earnings growth in the second quarter, he said.
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