We’re back to fretting over market breadth. It’s an all-too-familiar concern for US equities, and really for all equities given the extent to which American mega-cap dominance is a fixture of any global, cap-weighted benchmark that includes US shares.

I tend to brush these sorts of concerns aside which, in my defense, is something different from ignoring them entirely. Protesting record highs for cap-weighted equity benchmarks by reference to where they’d be if it weren’t for the top stocks is the bearish equivalent of saying “Everything’s great if you ignore all the bad stuff.”

Put differently: There’s something ridiculous about claiming that stocks aren’t doing so well if you exclude all the best stocks. While it’s self-evidently true that a broader market’s a healthier market, not all companies are created equal. Everybody can’t go, as Benny says.

The other issue I have with narrow market laments is that they often feel like last ditch efforts to explain away a rally somebody missed. When all else fails — when you fail — call the rally “fake.” (“I wasn’t wrong. It cheated.”)

With those caveats, market breadth’s quite narrow. Again. According to Oppenheimer, the spread between stocks making new highs on the NYSE and those plumbing new lows slipped below the threshold which historically presaged lackluster forward returns in and around S&P breakouts. Bloomberg on Tuesday noted that a mere 10% of S&P stocks are driving index returns versus more than 20% on average in the 14-year period from 2010 to 2024. And on and on.

While lifting his year-end S&P target on Monday evening, Goldman’s David Kostin likewise flagged “extremely narrow” market breadth. “The 25% S&P 500 rally since the April low ranks above the 99%ile of three-month returns during the past 50 years and has been the sharpest outside of a recession in 20 years,” he wrote, before quickly noting that although the S&P’s historically rapid recovery pushed the index to new records, the index’s median constituent “remains more than 10% below its 52-week high.”

The figure on the right, above, gives you some context for that statistic: Goldman’s breadth indicator just plunged to one of its most extreme readings ever looking back nearly half a century.

What does all of this portend? Well, it’s impossible to say for sure, but generally speaking, this degree of narrowness means laggards will catch up, or the leadership will “catch down.” Plainly, the former’s preferable to the latter, but despite his rosy view on the index, Kostin doesn’t see a lot of scope for the catch up trade.

“Although we expect the market rally to broaden during the next few months, we believe there is a limited runway for small-caps and other ‘lower quality’ stocks to consistently outperform,” he went on, in the same note. “For a structural regime shift away from the recent mega-cap market leaders, we believe that investors would need to embrace a substantially stronger economic growth [outlook] with more Fed easing than our economists’ currently forecast.”

And yet, that cautious view didn’t stop Goldman from lifting its index forecast, which brings us full circle. It’s foolish to ignore breadth laments entirely, but like trying to time the market with valuations, calling tops and bottoms using breadth measures and metrics is risky business.