I’m tired of editorializing around mega-cap “tech” dominance and extreme market concentration. Honest to God I’m exhausted with it.

Everybody gets it. It’s a dangerously narrow rally. If that sort of thing makes you nervous, maybe you need some protection to sleep better. Downside’s rarely been cheaper. Avail yourself if it’ll make you more comfortable.

The build-up to Nvidia’s report on Wednesday afternoon in the US was nothing short of absurd. Speaking of dangerously narrow, just imagine how limited your horizons have to be for Nvidia’s quarterly earnings release to count as the highlight of your week. I have no interpersonal relationships whatsoever, no social life to speak of and spend roughly 18 hours every day steeped in the macro-market narrative and it’s not even the highlight of my week.

Anyway, what you can you do? What can I do? So many years ago, I inserted myself into a community of addicts who call gambling “trading” so they don’t have to admit they have a problem. (It’s not a casino, thank you very much. These are “capital markets.” And they’re good, efficient and function best when completely unregulated.)

Setting aside the sarcasm (for a minute or two at least), I felt obliged to highlight a quick Magnificent 7 earnings recap from Goldman’s David Kostin. This was part of the rationale for his SPX price target bump, which I mentioned in passing a few days ago.

If Nvidia matched estimates Wednesday, Magnificent 7 sales growth would be 15% YoY. Margin expansion 582bps. And earnings growth 58%. By contrast, Kostin noted, the remaining 493 stocks in the S&P 500 realized top-line growth of just 3%, while earnings fell 2% on 56bps of margin contraction.

That’s one helluva contrast, but Goldman was keen to point out that the weakness from the 493 was “primarily driven by Energy” and thereby “understates the growth of the ‘typical’ S&P 500 stock [which] grew EPS by 6% YoY” last quarter.

As the figure on the left above shows, Goldman expects very little (“modest” to use a polite euphemism) in the way of margin expansion for non-“tech” stocks going forward. Specifically, excluding Info Tech and Comm Services, Kostin sees just 12bps of margin expansion this year and 10bps next year.

Fortunately for the indexers out there (which, let’s face it, is all of us), “the fundamental strength of the mega-cap stocks should boost aggregate S&P 500 profits in 2024,” as Goldman put it. Indeed, the group’s results are singlehandedly responsible for upside revisions.

“During the past three months, Magnificent 7 earnings estimates have been revised upwards by 7% and margins have been revised upwards by 86bps [compared] with a 3% downward revision to earnings and 30bps downward revision to margins for the remaining 493 stocks,” Kostin went on, adding that the Magnificent 7 “accounted for 11% of total 2023 S&P 500 sales and 18% of earnings.” For 2024, consensus sees 20% EPS growth for the group.

So, there you go. That’s where things stood headed into the single-most important event in recent human history if you don’t count pandemics, wars, the slow demise of democracy and pretty much every other story that might land above the fold at a news outlet other than Bloomberg.

I know, I know: I’ll regret that overly sardonic assessment when Skynet becomes self-aware — “at 2:14 AM, EDT, August 29.”