Despite banking jitters, stubbornly high inflation and lingering recession fears, the U.S. stock market rebounded in 2023, recovering most of the losses incurred in the 2022 market rout. Having been the main driver behind the previous year's downturn, the tech sector returned to its more familiar role as market motor in 2023. Fueled by excitement over the potential of AI, companies such as Microsoft, Alphabet and Nvidia saw their share prices surge over the past 12 months, pulling the market out of its post-Covid funk almost single-handedly.
According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, the information technology and communication services sectors, i.e. most things tech, were responsible for more than 70 percent of the S&P 500’s total return of 26.3 percent last year. Excluding companies from these two sectors, the index would have returned just 7.6 percent in 2023. The “Magnificent Seven” – Apple, Microsoft, Nvidia, Amazon, Meta, Tesla and Alphabet – accounted for roughly 60 percent of the index’s total return, illustrating how top heavy last year's rally has been.
One other major contributor to the latest stock market upswing was the consumer discretionary sector, which accounted for 15.9 percent of the S&P 500’s total return in 2023. While this may seem surprising during times of high inflation, when consumers typically cut back on non-essential spending, it’s important to note that mega caps Amazon and Tesla are part of this sector. Given their size and weight in the market-cap-weighted index, these two companies, which saw their share prices surge 81 and 102 percent, respectively, were responsible for most of the sector's overall contribution.
