Why should we be cautious about the US stock market? After the surge of tech giants, there is almost no room for error!

There are two major trends in the US stock market recently that should not be underestimated: one is related to the tech giants that have experienced a surge since last year, and the other is related to former President Trump's presidential campaign.

In terms of tech giants, as of last Friday, out of the seven major tech stocks including Apple, Microsoft, Alphabet-C (the parent company of Alphabet-C-C), Meta, Amazon, NVIDIA, and Tesla, only NVIDIA has not yet released its earnings report. Last week alone, five out of the seven giants, excluding NVIDIA and Tesla, released their earnings reports. Among them, Microsoft, Apple, and Alphabet-C-C all reported higher fourth-quarter revenue and profits than Wall Street expectations, but their stock prices did not collectively rise. Alphabet-C-C, whose advertising revenue fell below expectations, experienced a more than 7% drop on the first day after announcing its earnings report, and a cumulative drop of nearly 6.7% for the week. Apple, which saw sales in the Chinese market drop more than expected by 13%, fell 3.4% for the week. Microsoft, whose Windows, gaming, and devices business profits were disappointing, experienced a drop on the first day after announcing its earnings report, but rebounded continuously and rose 1.8% for the week.

Some commentators pointed out that even though the overall performance is still better than expected, the aforementioned giants have underperformed analyst expectations in some key business areas. This earnings season, investors have one word to describe their demands for tech giants: perfection. In other words, after the stock prices of these super blue-chip tech companies have soared, the market has left them with almost no room for error.

Why have investors become so "picky" about the performance of these giants? George Maris, Chief Investment Officer of Global Equities at asset management company Principal Asset Management, believes that this is because too many investors have flocked to hold these giants, and any imperfections in their performance will be seen as a "disqualification".

Some analysts believe that the recent volatility in the tech sector demonstrates the challenge of high valuations for tech stocks. Some comments suggest that one of the major problems investors currently face is how long it will take for AI spending, which is used to build new businesses, to generate new revenue and profits. So far, the investments made by tech companies in AI have yielded little results.

Another major trend was revealed by Scott Bessent, the former Chief Investment Officer of Soros Fund Management, a hedge fund managed by Soros Fund Management from 2011 to 2015.

Bessent recently revealed in a report to investors of his macro fund Key Square Capital Management that he believes the record high of the S&P 500 index in January should be attributed to multiple nationwide polls that month showing former President Trump leading current President Biden in terms of support. He believes that as long as investors believe that Trump can win the election, he will bet on this Trump-style rise.

Bessent wrote, "The market is now focusing on the favorable market policies that Trump may introduce after his victory on November 5, 2024." He believes that if Trump is elected, he will promote economic prosperity, relax regulations and achieve energy independence. He will also work to revitalize domestic manufacturing and extend the tax reduction period.

Bessent pointed out that the market is particularly concerned about whether the tax reduction policies implemented during Trump's term, which will expire next year, will be extended or even made permanent. Biden's White House economic team has poured cold water on most of the tax reduction policies from the Trump era and called for increased taxation on businesses and high-income American citizens.

Bessent said:

"We expect the U.S. stock market to trend upward. Unless Biden has a significant lead, all market corrections should be seen as buying opportunities for investors."