Very Narrow Stock Market
There is an unusual dynamic in the stock market that technical analysts find worrisome. However, since I am the world’s worst market forecaster, I will only outline what is happening and then leave it to others to determine its implications. While the price of the S&P 500 has increased about 10% this year, a large portion of that return has been concentrated in just eight stocks. Another indicator of this phenomenon is the number of S&P stocks that are beating the index. At 20%, this statistic has not been this low since the 2000 tech bubble.
And, the following chart shows that 28.7% of the S&P Index value is concentrated in just ten stocks. While off of its high slightly, this statistic significantly exceeds the levels present in 2000 and then again in 2008. Both charts indicate that this is a very narrow market that is being dominated by Apple, Microsoft, Amazon, Nvidia, Alphabet, Berkshire Hathaway, Meta, and Tesla. While one indicator never tells the entire story, a lack of breadth in the market is frequently a predictor of poor future returns.