If it feels to you like US equity market breadth’s a perennial concern, you’re not wrong.

Notwithstanding a few fleeting periods during which the market broadened out, narrowness and concentration are always top of mind in a world where “corporate America” really just means a handful of mega-caps.

In that sense, this discussion’s not new. Nor news, with an “s.”

However, the situation’s more acute now than it’s been at least since the dot-com bubble. On some metrics, it’s the most extreme in a century.

You scarcely need me to show you another chart depicting “Magnificent 7” concentration as a share of market cap. Similar charts using alternative groupings (the top 10 companies, the “Big 10 AI” names, etc.) are likewise worn out.

But on Monday, Morgan Stanley’s Mike Wilson presented a different measure of equity market narrowness you may not have seen. The figure below shows the share of top 500 stocks which have outperformed the cap-weighted index over a rolling one-month window.

As Wilson noted, “breadth is as narrow as it’s been going back to 1965” on that metric. Just 20% of the top 500 stocks are outperforming the cap-weighted index.

Somewhat amusingly — and not coincidentally — that’s roughly the same as the share of equity ETFs outperforming the S&P 500 in 2024. As noted in the latest Weekly, a mere one in five stock ETFs is keeping up with the benchmark this year.

If you’re curious, the situation doesn’t look much better if you change the lookback to a rolling 12-month window. Breadth’s still quite poor.

So, is this as ominous as it’s typically presented? Actually no. “Interestingly, narrow breadth does not necessarily mean weak returns looking forward,” Wilson remarked, noting that the average cap-weighted index return six months forward amid poor breadth readings on the metric shown above is 4%. It’s even better for the equal-weighted gauge, at 5%.