I don’t know if I’d call it a “consensus” narrative exactly, but a popular take on equities for the balance of the year says that as the Fed starts to dial back policy restriction, the rally will broaden out.

This is, famously and on several metrics, one of the narrowest equity markets in living memory, a state of affairs critics consistently deride as unhealthy and, ultimately, unsustainable. Maybe they’re right, maybe they’re wrong, but the issue for some Wall Street bears is that the market can stay narrow longer than they can stay employed, to adopt and adapt the old adage.

I don’t know how much figurative or literal stock to put in the breadth bull thesis. On some days, it feels like a belabored attempt to goal-seek a benign resolution to the narrowness “problem” — an end-around that avoids grappling with the prospect of a market correction in the event the mega-caps stumble.

In any case, that’s some quick context for what, as of midday Thursday, was shaping up to be a rather dramatic session for small-cap outperformance. And for the “breadth bull” more generally.

The Russell 2000 rallied more than 3% amid Fed cut wagers tied to the CPI release. By contrast, big-cap tech pulled back meaningfully.

The result of that juxtaposition was ~500bps(!) of outpeformance for small-caps, among the best relative sessions for the Russell since January of 2021.

Similarly, the equal-weighted S&P was on track to outperform the cap-weighted benchmark by ~200bps.

That’d be the best relative session for the egalitarian gauge since November of 2020, when Joe Biden was elected and the vaccines were approved.

If nothing else, Thursday was a reminder that counter-trend moves in relative performance can be dramatic indeed.

But a word of caution: The S&P was lower into the US afternoon. This is a market that’ll struggle to advance if the mega-caps are under pressure. And that underscores my reservations about the breadth bull case. A broader “rally” may not be a rally at all.