Bubble Watch for June 2024

June starts with the S&P 500 (SPY) gaining 5.4% in May 2024 and the Nasdaq (QQQ) rising by 6.92%. The reliance of both indices on magnificent seven stocks increases risks for investors. The market is potentially in a technology valuation bubble that readers should watch out for.

In the last quarter, Apple (AAPL) bounced back from a 52-week low of $164.07 by announcing an aggressive stock buyback campaign. Bears, who hold a negligible 0.65% short float against AAPL stock, expected declining iPhone sales would hurt the stock. Fortunately, China accounted for much of the slump in sales. Expect Apple to isolate itself from the slowdown in China. It will achieve modest growth through sales of new Macbook computers and iPads.

Microsoft (MSFT) should retain its largest market capitalization title, fending off Nvidia (NVDA). The latter needs over $400 billion in market cap to match that of Microsoft. Still, MSFT stock is more attractive because of its broader business. It can grow sales of PC AI hardware while expanding profits from Azure, SQL, and Microsoft 365 product and service sales.

Among the M7, Amazon (AMZN) has risks. The stock indicated a double top at $190 in the last two months. The downside risk for AMZN stock is below $160.

This month, Tesla (TSLA) stock will react to shareholders voting on CEO Elon Musk’s over $55 billion pay package.

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