The benchmark S&P 500 index closed out its best May in more than 30 years, largely driven by the ongoing strength of the Magnificent Seven tech stocks.
The S&P 500 posted its strongest May performance in 35 years, climbing 6.2% over the course of the month. A key factor behind the rise was the dominance of the “Magnificent Seven” tech stocks.
The likes of Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL, GOOG), Amazon (AMZN), Meta Platforms (META), Nvidia (NVDA) and Tesla (TSLA) accounted for around 62% of the index’s total gain during the month.
Out of the seven Big Tech giants, six outperformed the broader index, with the Nvidia and Tesla stock price seeing the greater gains, each rising by more than 20%. Apple was the only member of the group of companies to fall short of the benchmark’s return.
S&P 500’s Breakout Month
The S&P 500 delivered a standout performance in May, recording a 6% gain. It represents the index’s strongest May since 1990 and the second-best on record going back to 1948. Such a sharp rebound is even more impressive, considering it followed a shaky April that had many investors preparing for further declines.
Looking at historic trends, a strong May often extends into June, delivering a median return of 0.6%. This means that there is the potential for momentum to carry into the following months. Indeed, data going back nearly a century shows June often delivers above-average returns after a breakout month of May.
Moving forward, July typically sees further gains in this scenario. Generally speaking, autumn can be trickier, with September and October having a history of market volatility. October, in particular, typically delivers weaker results.
Meanwhile, November has traditionally brought strong returns, with a median gain of around 3.8%. Against the backdrop of today’s uncertain world, market conditions can shift quickly, and historical patterns are far from guaranteed. Let’s see how it all plays out in the weeks and months ahead.
Magnificent Seven Stocks Soar: Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia and Tesla
One of the driving forces behind the S&P 500’s strength is the Magnificent Seven stocks. In the first quarter, these leading firms reported combined year-on-year profit growth of 27.7%, far outweighing the 9.4% rise seen across the rest of the S&P 500.
They also beat earnings expectations by a far wider margin, with an average surprise of 11.7% versus 4.6% for other companies. This momentum has also been felt in the market. The Roundhill Magnificent Seven ETF (MAGS), which tracks these stocks, gained around 11% last month – nearly double the S&P 500’s return over the same period.
What this signals is that investors are demonstrating a clear preference for large-cap names during this rally. As long-term bond yields rise to levels not seen since 2008, many investors are turning to well-established companies they believe are better equipped to withstand ongoing market volatility.
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