Last week, Goldman warned that market concentration had exceeded levels seen during the dot-com boom (and subsequent bust).
"Coming into 2020, the five largest S&P 500 stocks accounted for 18% of index market cap, matching the share at the peak of the Tech Bubble in March 2000”, David Kostin wrote, adding that "since then, those stocks (MSFT, AAPL, AMZN, GOOGL, FB) have risen to account for 20% of market cap".
That underscored the notion that despite the grievous swoon for markets in March, big-cap tech is still a bubble on a relative basis, and likely on an absolute basis as well, with Microsoft, Apple, Amazon, Google and Facebook trading at - checks notes - 28x expected 2021 EPS.
Read more: Goldman’s Warning - Market Concentration Now Exceeds Tech Bubble Peak
Goldman cautioned that "eventually, narrow rallies [often] lead to large drawdowns as the handful of market leaders ultimately fail to generate enough earnings strength to justify elevated valuations and investor crowding".
That's the "catch-down" scenario, in which gravity reasserts itself, yanking the largest names down to what, in hindsight, is seen as the "reality" of the broader market.
Fast forward a week
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