The concentrated market narrative continues to resonate.
Although I’ve endeavored to emphasize that a narrow market isn’t necessarily a market that’s doomed, nobody will blame you for refusing to ignore the 800-pound gorilla.
To mix kindred metaphors, this particular elephant comprises nearly 30% of the proverbial room.
The chart above is hardly new let alone news. But it’s a holiday in the US, which means there’s no news to be had, so I’ll be forgiven.
There actually was some news during Monday’s compressed session. Appropriately, it was a rally in one of the “Magnificent 7” (Tesla, on delivery numbers).
In a note published Monday, SocGen’s Andrew Lapthorne observed that although US-based investors are “obsess[ed] about performance being concentrated in just a few stocks, the overall rally is actually quite broad.”
If you “equal-weight” (used as a verb here) MSCI gauges for Europe, Japan and the US, you’ll find the best start to a year in a quarter century. Of course, the cap-weighted Nasdaq 100 had its best start to a year ever+, but you get the point: The market is perhaps healthier than you’ve been led to believe.
For his part, Lapthorne doubts the notion that it’s “all A.I.,” even if it’s almost “all tech.” Or at least “the cynic” in him doubts it.
“The contribution of the top 10 stocks to the S&P 500 performance is sizable [and] the A.I.-theme is assumed to be behind this performance, but the cynic in me would also highlight that the most obvious commonality amongst this year’s US winners [is] their big losses in 2022,” he wrote.
Good point. It’s those sort of common sense observations that make Lapthorne’s short weekly missives a must-read for a lot of folks.
He went on to pose a simple question related to the second visual above: If the A.I. theme is all there is to it, why are so many Nasdaq stocks still down so much from their two-year highs?”
