There’s a “stealth correction” afoot in the equity market.

What? You didn’t notice? Well, that’s because it’s “stealth” — playing out beneath a glossy veneer of inexorable AI exultation.

“Kospi, Bovespa, France, homebuilders, energy, biotech, healthcare, transports, defense, REITs… are we in a bear market?” someone wondered, from the “zeitgeist” quotes in the final 2024 installment of Michael Hartnett’s popular “Flow Show” weekly.

It’s true. There are far more “have-nots” than “haves” — always, but particularly right now, when the weight of the rally rests almost entirely with America’s monopolistic mega-caps. The figure below from Hartnett is as simple as simple gets, but as I’m fond of saying, there’s a certain elegance in simplicity.

The disparity between the market cap of the S&P and that of the index excluding the vaunted Mag7 began to widen out dramatically during the early stages of the pandemic equity boom. Four years later, it’s a veritable chasm.

As Hartnett noted, that gap is now $18 trillion. “Monopolies are monopolizing returns,” he wrote, as the S&P heads for another year of 20%+ gains versus a relatively paltry 8% for the SPX excluding the 12 largest stocks. (I should mention that 8% ain’t bad on its own — that’s basically the historical average annual return for the equity portion of a balanced portfolio.)

Hartnett voiced concern. “Both US and global equity breadth remain dire,” he warned. “The winners must keep winning to keep the ‘stealth correction’ under the hood.”