Tesla, tech and travel stocks have ginormous gains this year

By Paul R. La Monica, CNN

Last year’s stock market zeroes are so far turning out to be this year’s Wall Street heroes.

The best performer in the S&P 500 year to date through Monday’s close is Tesla. Elon Musk’s electric car giant is up nearly 70% in the first two months of this year, following a more than 65% plunge in 2022.

CNN owner Warner Bros. Discovery is the second-biggest winner in the S&P 500 thus far this year. The stock has surged 68% after falling 60% in 2022.

And chip giant Nvidia, which tumbled 50% last year, has rebounded more than 60% in 2023.

Investors are flocking back to momentum names in the tech and consumer discretionary sectors. Facebook- and Instagram-owner Meta Platforms has surged more than 40% this year. CBS parent company Paramount has shot up more than 30% as well.

Beaten-up travel stocks have also enjoyed solid gains this year, as investors bet that the worst-case fears of an imminent recession may turn out to be for naught and consumers catch up on missed travel.

Cruise line owners Royal Caribbean, Norwegian and Carnival are near the top of the S&P 500 winners list this year. So are shares of airlines United and American, casino companies MGM, Wynn Resorts and Caesars and online travel leaders Booking Holdings and Expedia.

Too far, too fast for tech and growth?

Some fear this ferocious rebound in consumer and tech stocks may be happening too quickly. After all, inflation remains the number-one concern for the Federal Reserve. More rate hikes are likely, and that could slow the economy and take a bite out of earnings growth. That makes it harder to justify sky-high stock prices.

“There are worries that the Fed is going to create a recession,” said Paul Nolte, a senior wealth adviser and market strategist with Murphy & Sylvest. “That means there are broader opportunities outside of tech and growth stocks and more in the value and small cap sectors.”

Growth stocks, and tech in particular, make more sense as investments if the Fed were set to start slashing interest rates.

Analysts at the BlackRock Investment Institute said in a report this week that the dip in value stocks so far this year was primarily due to hopes that the Fed would begin to ease its monetary policy stance and cut rates if inflation ebbed and the economy began to slow. But that no longer seems to be in the cards.

“We think value can regain the lead. Why? Higher interest rates and inflation, and a steeper yield curve. That all favors value over growth,” the BlackRock analysts said.

The potential re-emergence of China’s economy following years of Covid-related shutdowns could also boost commodity prices… and the more value-oriented oil stocks that tend to rise along with crude prices.

“We expect broad commodity indexes to move higher, given constrained supply and strong demand. Commodities should benefit from China’s reopening,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a report.

Add all that up and it could mean that the recent rebound for Tesla, big techs and media firms and other consumer stocks could be short-lived.

“Inflation and interest rate uncertainty means we continue to believe value stocks, including the global energy sector, will outperform growth stocks,” Haefele said.

The-CNN-Wire
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