It has been a great year for the stock prices from some very well-known companies, and in a few cases surprisingly.
The performance of the broader market was not too poor either. Since the start of the year, the S&P 500 (^ GSPC) rose 16%, with a gain of only 8.5% in the second quarter. The 40 best-performing stocks in the S&P 500 registered a median gain of 60.4%, according to data from Goldman Sachs (SG).
This double-digit appreciation of the S&P 500 comes despite several formidable headwinds swirling around, ranging from Archegos Capital Management explodes in winter threats of tax hikes from the Biden administration to a change of tone on Federal Reserve monetary policy.
The three best performing sectors in the S&P 500 are energy (+ 45%), finance (+ 25%) and real estate (+ 24%).
Under the hood of the S&P 500, there have been a host of mind-blowing gains as seen below in a new chart from Goldman Sachs.
In the not-so-surprising category, there are respective increases of 69.1% and 49.1% in Ford’s stock price (F) and General Motors (DG). The two auto giants have enjoyed strong pricing power amid vehicle shortages caused by the yawning semiconductor shortage. Each has also been praised by Wall Street for its aggressive pushes into electric vehicles. as they seek to challenge electric vehicle leader Tesla (TSLA).
The 53.3% increase in Nvidia shares also seems rather deserved. Analysts hung on to shares of the chipmaker this year amid good results for its gaming chips and exposure to crypto mining. The impending $ 40 billion deal for Arm is also seen as a shift for the company’s future profit power.
When it comes to surprises in the market, there are several that stand out.
For starters, Gap shares have climbed 68% since the start of the year on optimism about Kanye West’s new clothing collection for the retailer and people buying clothes en masse for their post-pandemic lives. But, the company is still viewed as a long-term market share loser by most Wall Street analysts.
Of the 21 sell-side analysts who cover Gap, only four rate the stock as a buy, according to Bloomberg data. A total of 14 analysts rate the stock as held, including one which sells.
Wells Fargo (WFC) Shares have shocked 50.8% this year as new CEO Charlie Scharf struggles to stabilize the company after his high-profile account fraud scandal. The bank is generally seen on the streets as not being fundamentally as strong as its competitors JPMorgan (JPM) and Bank of America (BAC).
Meanwhile, five of the top 10 performing stocks on the S&P 500 this year are energy companies. While the names seem to follow the 45% rise in oil prices this year, the gains are somewhat surprising given the increased focus of institutional investors on ESG issues. ExxonMobil is up an interesting 57.9% this year even as it battles through a board reshuffle, inflated cost structure and questions about the leadership of its CEO Darren Woods.
Whether the S&P 500 can continue at its meteoric pace demonstrated in the first half is to be guessed. The headwinds mentioned above for stock prices are probably not going anywhere and could in fact be blowing harder, some analysts say.
“You have two big headwinds facing the market over the next six months which I think are likely to dampen appreciation. The first problem is the rate hike. [interest]. The idea of higher rates is usually associated with lower valuations, ”Goldman Sachs chief US equity strategist David Kostin said. Yahoo Finance Live.
Kostin says the other problem facing investors is in the hands of lawmakers.
“The second issue is tax reform. We are sitting here today literally in the middle of the year and this will likely be the dominant topic in terms of policy over the next few months in Congress as they negotiate both the potential for higher corporate tax rates and the potential for higher capital gains rates, ”Kostin added.
Kostin’s 2021 price target for the S&P 500 is 4,300, a shade below its current level of 4,352.
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