Only a Bear-Market ‘Shock’ Can Upend Tech: JPMorgan’s Kelly

The outsized sway of technology giants over U.S. stocks is likely to persist, absent a major market rout along the lines of what investors endured in 2022, says JPMorgan Asset Management’s David Kelly.

The firm’s chief global market strategist is among Wall Street pros who expect earnings growth in the S&P 500 Index will broaden beyond the tech behemoths by year-end.

But in his view, it likely won’t be enough to close the wide performance gap between those megacap shares and the rest of the U.S. equity benchmark.

That means an extreme blow to market sentiment would be needed to derail the flow of cash into the soaring Big Tech names that have led the market’s advance in 2024, said Kelly, whose firm manages about $3 trillion.

Two years ago, for example, tech shares were crushed by the Federal Reserve’s aggressive tightening, and slumped more than the broader market.

“When you have the next bear market, then I think the highest-flying equities are the ones that are going to be most beaten up as indeed they were in 2022,” Kelly said in an interview. “You have to have a shock to market sentiment in order to disrupt the pattern we’re seeing in terms of how people are deploying their money.”

Big technology companies have been sitting atop the stock market for years, but their grip has never been as tight as it is now.

A version of the S&P 500 that makes little distinction between Microsoft Corp. and Macy’s Inc. has trailed its cap-weighted peer by 10 percentage points this year, a record January-June underperformance, data compiled by Bloomberg show.

Profit growth for the Big Tech stocks is largely expected to slow, while the remaining S&P 500 companies are poised to see earnings accelerate, in the view of many forecasters.