Investing in public equities is an activity that allows everyone to generate wealth. This has been a smart move in the past decade, as the S&P 500 (^GSPC -0.23%) has produced a total return of 322% since early August 2016 (as of Aug. 5).
Before rushing in, though, it’s important to understand what makes today’s environment unique. Here’s one thing all long-term investors need to know about the stock market right now.
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You are partly correct if you guessed that the stock market is driven disproportionately by technology stocks. This trend has been going on for quite some time.
The more specific view, however, is that companies in the middle of the artificial intelligence (AI) boom represent a sizable portion of the equity market. The top companies in the S&P 500 are involved in AI in some way, most notably as hyperscalers or chip sellers. These leading 10 stocks combine to have a massive $27 trillion market capitalization.
Today’s Change
(-0.23%) -17.43
Index Level
7,706.12
Key Data Points
Day’s Range
7,698.15 – 7,742.85
52wk Range
6,310.32 – 7,793.68
If you buy an S&P 500 exchange-traded fund, you’re essentially making a bullish bet on the AI trend. The market’s performance going forward will be impacted by how these kinds of businesses fare relative to expectations. If disappointing financial results are reported, investors shouldn’t be surprised if stock prices drop over the short term.
Just keep in mind that long-term investors can afford to be bullish on investing trends they are confident about.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.