S&P 500's 493 Stocks Reach New Highs

Thulisa Shandu from EasyAssetManagement explores the resilient S&P 500’s 493 stocks reaching new highs, Nvidia’s potential to boost the market, and a hidden opportunity in the undervalued consumer discretionary sector.

What is the S&P500's 493?
It's a group of high-quality stocks, the benchmark S&P 500 excluding the Magnificent Seven. It demonstrated resilience and outperformance in a volatile market environment. Despite the broader market's struggles, the 493 has reached new all-time highs, suggesting that investors are increasingly favoring these stocks as a more resilient investment option.


Over the past two weeks, 12.3% of the 493 stocks have achieved new year-to-date highs. This is particularly noteworthy as the S&P 500 sectors of financials, healthcare, industrials, real estate, staples, and utilities have all reached new heights. This broadening trend in earnings recovery has likely contributed to increased investor interest in the 493.

Nvidia's upcoming earnings report could provide a boost to the Magnificent Seven. This group of high-profile tech stocks is still 9% below its July peak, and Nvidia, in particular, is 8.7% below its June high. If Nvidia reports strong earnings, it could help the Magnificent Seven recover and further drive the performance of the 493.

A Hidden Opportunity: The Undervalued Consumer Discretionary Sector
Despite its recent strong performance, the S&P 500's consumer discretionary sector remains undervalued relative to the broader market. When compared to the index, the sector's forward Ebitda/price ratio is significantly lower, suggesting that it is trading at a discount.

This undervaluation is even more pronounced when excluding the two largest companies in the sector, Amazon and Tesla. Without these mega-caps, the sector's relative multiple becomes even cheaper, indicating a potentially attractive investment opportunity.

The sector's current valuation is at its highest discount to the recent five-year average, suggesting that it is significantly undervalued. This undervaluation is likely due to a combination of factors, including concerns about economic growth, geopolitical risks, and the potential impact of rising interest rates.

However, the sector's strong fundamentals and growth prospects suggest that it may be poised for a rebound. As the economy continues to recover and investor sentiment improves, the consumer discretionary sector could outperform the broader market.

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