Tech stocks fueled a historic rally on Wednesday, pushing the Nasdaq Composite index above the 20,000 threshold for the first time. The surge was driven by megacap technology names, with Alphabet Inc. (GOOGL, GOOG) and Meta Platforms Inc. (META) hitting record closes. The Nasdaq jumped 1.77%, reflecting the tech sector’s strength this year.
Investors Face a Choice: Take Profits or Stay the Course
Richard Steinberg, chief market strategist at The Colony Group, likened the rally to “borrowing from Peter to pay Paul,” suggesting that current gains might come at the expense of future returns. While December has historically been a strong month for equities, investors seem unwilling to wait for the traditional “Santa Claus rally,” which begins December 24 and typically yields an average S&P 500 gain of 1.3% during the period. So far in December, the Nasdaq has already climbed 4.3%, according to FactSet data.
However, Steinberg warns that a year-end Nasdaq melt-up could dampen gains in early 2025. Concerns such as elevated 10-year Treasury yields, a strong dollar under Trump’s “America First” agenda, and potential deficit-related fears may create headwinds for growth stocks in the new year. Steinberg advises rebalancing portfolios to avoid being overly concentrated in equities.
Betting on Familiar Success
Others take a more optimistic view, emphasizing the appeal of sticking with strategies that have historically performed well. Keith Lerner, co-chief investment officer at Truist Advisory Services, highlighted the ongoing dominance of the AI theme as a key driver of the bull market. Despite political uncertainties, Lerner believes tech stocks remain resilient, buoyed by strong earnings expectations.
Callie Cox, chief market strategist at Ritholtz Wealth Management, called the 20,000 milestone a psychological marker that underscores tech’s stellar performance despite challenges like high interest rates. While she cautions against overemphasizing round-number milestones, Cox noted that the rally reflects robust investor confidence in technology’s growth potential.
What’s Next for Investors?
As 2025 approaches, the decision facing investors is whether to lock in profits now or continue riding the momentum in tech-driven markets. While concerns about valuations, rising yields, and fiscal policy loom, the enduring appeal of technology and pro-growth themes could keep driving markets higher—at least for now.
