It’s been tempting recently to write off or otherwise dismiss stock buoyancy as the product of blockbuster performance from a handful of names. After all, big-cap US tech just enjoyed its best quarter since 2012, and those gains were relatively concentrated.

If that’s your story, there’s some truth to it. A lot, actually. At the same time, though, equities have re-rated more broadly, which means the situation is amenable to a kind of “worst of both worlds” interpretation.

The figure below shows relative tech performance. If you were to zoom out, you’d discover we’re back near unprecedented levels. That is: Tech outperformance is approaching the extremes seen during the pandemic boom, and those peaks were emblematic of the kind of delirious tech optimism witnessed during the dot-com bust.

So, tech is indeed in the driver’s seat, and last month it pulled the “broad” market along for the ride. (Note the scare quotes.)

I talked extensively last week about what’s bolstered big-tech shares. To briefly recapitulate, there are a trio of factors at work. First, the recent move lower in bond yields helped long-duration equities. Second, the perceived safety of big-tech was attractive to some investors amid the bank worries. Third, tech was the hardest hit during last year’s aggressive rate-hiking campaign, so it has “more to gain” in a rebound, or at least that’s how some investors will see it.

But, to reiterate the narrow leadership point, breadth is poor or, “weak and divergent from price,” as Morgan Stanley’s Mike Wilson put it Monday. The figure on the left below is a rather poignant illustration.

The figure on the right from Wilson is also notable. Given high-profile rallies in some of the most recognizable tech names, it’d be tempting to assume that the cap-weighted multiple is now higher than the median stock. But that isn’t true.

“The median stock multiple across the S&P 500 is actually higher than the cap weighted multiple currently,” Wilson said. “In other words, valuation is broadly still expensive across large cap equities.” Note that the median forward multiple is now back out to 18x. It was ~15.5x when stocks bottomed in October.

If the economy is indeed poised for recession, bets on tech’s “defensive” characteristics could prove misplaced. There’s a vociferous debate going on regarding the notion that tech is more cyclical than most investors realize. “We advise waiting for a durable low in the broader market before adding to Tech more aggressively as the sector typically experiences a period of strong outperformance post trough — a time when its cyclicality works in its favor on the upside,” Wilson remarked.

Ultimately, the above suggests leadership is concentrated both on a sector basis and within tech itself, but at the same time, valuations are expensive broadly. That’s the worst of both worlds. Or so says my click-friendly headline. Remember: It’s entertainment.