Given the ubiquity of the “Magnificent 7” in market discourse, the prevalence of bear narratives predicated on extreme market concentration and the generalized hype around generative AI, it’d be easy to conclude that the US equity rally constitutes a hopelessly narrow tech bubble.

To be sure, that characterization isn’t wrong. Not entirely, anyway, and maybe not at all.

The tables below, from Goldman, are simple: They show the composition of what counted as the third-best Q1 for the S&P 500 in two decades.

The table on the left shows the sector breakdown. Out of 1,056bps of performance, more than 500bps was attributable to “tech+” (i.e., Tech and Comms Services). The table on the right shows the top individual contributors. Nvidia’s stupendous (the sarcastic among you might suggest I drop the “ous” and substitute “i” for “en”) run single-handedly accounted for a quarter of Q1 gains.

The index trades on a 21x multiple, up 7% YTD. So, again, it’s not wrong to suggest the US equity market’s a tech-centric, AI-inspired “bubble,” with the scare quotes to denote that smart people can disagree on what kind of forward multiple counts as a bubble.

And yet, that characterization misses key nuance. The figure below’s from SocGen’s Andrew Lapthorne.

“The equity narrative appears to be changing, away from a narrow group of mega-cap leaders (and AI stocks), towards a cyclical upswing,” Lapthorne wrote, in his latest.

He noted that while that “may seem at odds with an AI-and Tech-obsessed market,” the fact is, performance for short-duration equities (so, stocks that prefer rising bond yields) is “more evenly distributed” in 2024, “with most having made good gains,” as shown in the chart.

Of course, there are some enormous gains for the best-performing long-duration shares, which is to say bond proxies, growth and tech. Nvidia’s the quintessential example. You can see it on the chart: It’s the towering red bar that compels a stretched y-axis. But that group (the group that likes falling bond yields) “also has a long tail of large losses,” as Lapthorne went on to note.

Goldman’s David Kostin underscored the point. “While strong performance by several of the largest mega-cap tech stocks helped lift the index, market breadth improved in Q1,” he wrote this week. “Underneath the surface, Cyclicals outperformed Defensives… as the market continued to price an optimistic growth outlook amid firm economic data.”