The Coming Market Singularity
Carrying-on about the many perils of equity market concentration runs the risk of eliciting exhausted eye rolls from shrewd market participants.
If I weren't the guy carrying-on, I'd be the guy rolling his eyes.
Espousing a "stocks are doomed because the rally's top-heavy" narrative is a tried and true method for generating applause among two cohorts:
People who, were they born a generation or two earlier, would've read tabloids in the grocery store checkout line
Committed bears pini
Concentration is generally not great for markets, but sector/factor rotation can cure it without a major drawdown. Or the market can crack.
So as the market cap weighted and equal cap weighted versions of the S&P 500 are likely to diverge, as market caps diverge, should the S&P 500 be updated to the S&P 200 perhaps, to make it more reflective of large cap dominance ? I imagine that the bottom 200 or more companies by market cap in the S&P 500 are too small to be relevant.
There’s always the Nasdaq 100.
For those unwilling to take a seat on the crazy train and enjoy the ride, one popular idea was to buy oil stocks. Looking at this week’s results, there may be some disappointment. Why bother to move from Ai and Weight loss stocks? Except if you need tax losses to offset your massive gains.
The rising awareness of The Singularity, and The Market Singularity as a natural subset of The Singularity, will result in discussions that are elevated in importance to levels equivalent with the ongoing debates over rstar.
Looking forward to your take.
Full disclosure- I am long NVDA, in an outsized position. After careful analysis with an initial objective to trim, I held.