As S&P 500 hits new highs, experts say generative artificial intelligence will create new investment opportunities

The S&P 500 climbed to another record close on Tuesday.

The index, which tracks the performance of about 500 of the largest U.S. company stocks, has risen 53% since inflation peaked in 2022, experts noted during the CNBC Financial Advisers Summit on Wednesday.

While this may prompt fears that a pullback is on the horizon, stocks may have more room to run.

“I absolutely feel better about stocks than I have since the financial crisis,” said Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America.

Today, companies have adjusted to a high inflation environment while workers are seeing positive real wage growth, Subramanian said. Admittedly, there are drawbacks including the wealth divide, the income gap, and protectionist tendencies in the U.S.

“But I don’t think they are necessarily negative for the market,” Subramanian said. “I think they’re actually very positive for the S&P 500.”

The strong result could also make financial advisers wary of allocating new capital, said Tim Seymour, founder and chief investment officer at Seymour Asset Management.

Many investors are tempted to stay in cash because “they just feel comfortable there,” according to Courtney Garcia, a certified financial planner and senior wealth advisor at Payne Capital Management.

But while guaranteed returns of up to 5% in cash may feel good, it’s not necessarily keeping pace with inflation, Garcia said. That’s a caution she explains to clients, she said.

Investors can still find new opportunities to invest in stocks, experts said during a session at the summit.

In 10 years or less, S&P 500 index companies will likely become more efficient and easier to work for, due to the effects of generative artificial intelligence, Subramanian said.

“Generative AI is a game changer,” said Subramanian. “And what it can do for industries is profound.”

Call centers have already been disrupted by artificial intelligence, and other fields such as financial services, legal services and Hollywood could still benefit, she said.

In the 1980s and 1990s, a similar productivity and efficiency story unfolded with the personal computer revolution, which spurred more automation across industries.

Some companies will be ready to figure out how to use AI generating tools early on, which will drive their margins to expand and increase their overall multiples, according to Subramanian.

“What you want to do is figure out which leadership teams are going to leverage the strength and power of many of these new tools and do it first and do it well,” Subramanian said.

The “Magnificent Seven” companies Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta Platforms will continue to dominate in terms of growth, Seymour said.

But opportunities in healthcare, industries, energy and utilities are cheap. International exposure should not be ignored, he said.

Each of the companies in the Big Seven has different drivers, advantages and threats, Subramanian noted. That’s how investors should think about the entire S&P 500, she said.

“Where we are today is a real stock picker’s market,” Subramanian said.