Risky Stocks Begin New Year Ahead of S&P 500 Amid Uncertainties
(Bloomberg) — Investors rushed into the riskiest corners of the US stock market Monday giving last year’s laggards a big boost.
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Shares of unprofitable technology companies, distressed corporations and firms with a high short interest, were among the big gainers by midday in New York. The advance has the group outperforming the S&P 500 Index, which clocked in a stellar rally last year, in the first few trading days of 2025.
The Goldman Sachs Group Inc. index of non-profitable technology stocks rose over 4% by 12 p.m. New York time, while a Goldman gauge for most-shorted stocks climbed 1.5%. Last year, both Goldman indexes — especially the gauge tracking unprofitable tech firms — lagged the benchmark.
“After resting post-Christmas the election euphoria has reasserted itself. This is aggressive risk-on trading,” Michael O’Rourke, chief market strategist at Jonestrading. “I see this as a short-term beginning of the year phenomenon that likely runs out of momentum by the end of the week.”
The bigger appetite for risk, however, did not give as much of a boost to small-cap stocks on Monday, with the Russell 2000 Index lagging behind the S&P 500. The small-cap index gained as much as 1.1%, while the S&P 500 rose 1.3%.
The risk-on trade also comes at a time when uncertainties are looming large everywhere. There is the possibility that US President-elect Donald Trump will unleash a new wave of tariffs and spark off a trade war with key allies when he takes office later this month. The Federal Reserve’s interest-rate path also remains unclear as inflation has stayed stickier than expected. Meanwhile, worries about the high valuations in technology stocks have started to grow.
Despite those concerns, a slew of positive news on Monday pushed technology stocks higher. First, Nvidia Corp.’s server assembly partner Hon Hai Precision Industry Co. — also known as Foxconn — reported faster-than-expected revenue growth on continuing demand for artificial intelligence infrastructure. Then, Qualcomm Inc. introduced new chips designed to power personal computers capable of running the latest artificial intelligence software yet cost as little as $600. Investors also expect a speech from Nvidia Chief Executive Officer Jensen Huang to move the chipmaker’s shares.
