Whatever
the
ultimate
diagnosis
for
the
market’s
present
condition,
symptoms
include
“mild
discomfort
with
intermittent
fever
and
chills.”
For
sure,
its
overall
condition
is
healthy,
in
the
most
broadly
observable
respects.
The
S
&
P
500
made
a
new
record
high,
its
25
th
of
the
year.
The
index
has
now
gone
328
trading
days
without
a
2%
one-day
decline,
its
third-longest
such
streak
this
century.
And
on
the
surface,
there
is
a
stolid
calm
that
suggests
a
system
in
comfortable
equilibrium,
the
market
achieving
a
kind
of
homeostasis.
Four
of
the
past
five
days
last
week,
the
S
&
P
500
moved
less
than
0.2%.
The
fifth
day,
Wednesday,
kicked
in
the
bulk
of
the
week’s
1.3%
gain.
The
CBOE
Volatility
Index
finished
back
near
the
12
level
that
has
defined
a
recent
floor
not
previously
seen
since
the
carefree
moment
before
the
Covid
crash.
.VIX
5Y
mountain
CBOE
Volatility
Index,
5
years
This
display
of
temperate
calm,
is,
of
course,
not
quite
as
uniformly
steady
as
the
above
would
make
it
seem.
This
is
where
the
feverishness
and
chills
are
roughly
offsetting
one
another,
sometimes
uncomfortably.
Nvidia,
GameStop
fever
The
overheated
excitability
of
Nvidia
,
described
here
at
length
last
week,
is
tough
to
escape
or
dismiss,
a
$3
trillion
market-cap
company
trading
historic
daily
dollar
volumes
and
accounting
for
more
than
a
third
of
the
S
&
P
500’s
appreciation
in
2024.
NVDA
1Y
mountain
Nvidia,
1-year
Thursday
saw
some
$80
billion
in
Nvidia
common
stock
turn
over,
well
over
10-times
the
activity
in
comparably
sized
Apple
and
Microsoft.
Perhaps
this
was
peak
fever,
the
record
date
for
the
10-for-1
stock
split
that
takes
effect
Monday?
It’s
more
guess
than
analytical
assessment.
And
what
to
make
of
the
sweaty
exertions
of
the
GameStop
horde,
stampeding
the
shares
of
the
wobbly
retailer
between
25
and
47
Thursday
and
Friday,
rising
on
the
promise
of
investor
Keith
Gill
breaking
his
silence
and
then
falling
hard
on
the
lack
of
a
new
or
compelling
thesis
for
the
stock
.
For
now,
the
relapse
of
GameStop
fever
appears
a
less-extreme
case,
with
rallies
more
fleeting,
the
short
interest
not
as
heavy
and
the
company
itself
swamping
the
market
with
newly
issued
shares
–
following
a
45
million
sale
weeks
ago
with
another
planned
75
million,
in
total
amounting
to
total
dilution
of
40%.
GME
YTD
mountain
GameStop,
YTD
No
doubt,
overall
volumes
in
marginal
sub-$1
stocks
has
soared
in
recent
weeks,
and
retail
options
activity
continues
to
break
records.
But
it
hasn’t
become
pervasive
or
indiscriminate,
and
while
overall
investor
flows
into
equities
have
picked
up,
they
are
still
outpaced
by
the
sums
going
into
money-market
vehicles.
Decelerating
economy?
The
chills
were
felt
by
some
of
the
more
cyclical
segments
of
the
market,
at
least
for
most
of
last
week,
when
a
continued
decline
in
Treasury
yields
(the
ten-year
falling
from
4.6%
in
mid-May
to
4.28%
last
Thursday)
failed
either
to
improve
the
breadth
of
the
rally
or
enliven
small-caps,
banks
and
consumer
cyclicals.
This
reflected
a
heightened
sensitivity
to
signs
of
an
economy
decelerating
more
than
desired
or
intended
by
investors
or
the
Federal
Reserve.
Not
to
make
much
of
such
“growth
scare”
impulses,
but
a
series
of
downside
surprises
on
manufacturing
indexes
and
housing
numbers
and
the
sloppy
downside
reversals
in
crude-oil
and
other
commodities
were
bond-positive
and
disinflationary
but
not
broadly
equity-positive.
Friday’s
jobs
report
paired
a
very
warm
headline
payroll
gain
of
272,000
in
May
with
a
softer
household
survey
in
which
the
unemployment
rate
ticked
up
to
4%
from
3.9%.
Strong
enough
to
push
the
last
remaining
bank
economists
who
were
projecting
a
July
rate
cut
to
back
off
that
view,
but
not
so
strong
as
to
banish
worry
that
the
labor
market
is
going
beyond
rebalancing
and
into
deterioration.
The
confusion
manifests
in
what
remains
a
split
market,
the
headline
benchmark
pressing
highs
with
more
stocks
backsliding
than
rising
along.
The
S
&
P
500
is
up
almost
2%
since
its
closing
peak
at
the
end
of
the
first
quarter,
perhaps
the
moment
of
maximum
belief
in
a
seamless
soft
economic
landing.
The
equal-weighted
version
,
however,
is
3.4%
below
its
March
28
crest.
Bespoke
Investment
Group
last
week
noted
the
index
had
hit
its
latest
new
high
with
the
10-day
tally
of
advancing-vs.-declining
stocks
negative.
It’s
the
kind
of
thing
that
can
be
made
to
sound
a
bit
ominous,
and
no
doubt
more
inclusive
rallies
tend
to
be
better
forward-looking
signs
of
health
than
narrow
ones.
But
the
prior
17
times
the
index
hit
a
new
52-week
high
with
similarly
poor
breadth,
future
returns
going
out
several
months
were
a
touch
better
than
average.
Market
too
top
heavy?
Three
stocks
together
now
account
for
fully
20%
of
the
S
&
P
500
market
value,
mocking
the
notion
of
diversification
and
dashing
most
active
investors’
hopes
of
beating
the
bogey.
Michael
Mauboussin,
longtime
finance
researcher,
professor
and
investor
now
affiliated
with
Morgan
Stanley
Investment
Management,
released
a
thorough
look
at
stock-market
concentration
through
time,
arriving
at
some
interesting
conclusions.
One
is
simply
that
there
have
been
similarly
top-heavy
markets
in
the
past,
which
did
not
always
result
in
poor
subsequent
performance.
Note
the
early
1960s
in
this
chart
(which
has
data
through
the
end
of
2023).
Other
observations
were
that
concentration
tends
to
accrue
during
bull
markets
and
to
follow
superior
profit
growth.
Mauboussin
even
finds
some
evidence
that
times
when
the
market
was
less
top-heavy,
it
might
have
been
insufficiently
concentrated
—
too
diversified
—
given
the
subsequent
fundamental
and
share-price
outperformance
by
the
stocks
that
would
go
on
to
become
super-sized
in
later
years.
Still,
while
there
is
no
single
“correct”
way
for
markets
to
behave,
the
circumstances
under
which
other
groups
pick
up
the
slack
would
probably
fit
best
with
the
current
bull
case:
continued
disinflation
that
allowed
the
Fed
to
trim
rates
in
a
deliberate
way
as
the
economy
held
firm
and,
presumably,
the
AI
excitement
kept
animal
spirits
flowing.
Scott
Chronert,
strategist
at
Citi,
captured
the
crosscurrents
at
week’s
end:
“All
told,
the
S
&
P
500
continues
influenced
by
the
structural
growth
opportunity
in
generative
AI
as
an
offset
to
mixed
macro
picture.
In
the
meantime,
flows
have
faded,
the
Levkovich
[Panic-Euphoria]
Index
remains
in
euphoria,
implied
growth
expectations
have
ticked
higher
while
consensus
earnings
are
flattish.
The
near
term
set
points
to
some
digestion
risk
ahead,
but
no
change
to
our
ongoing
constructive
fundamental
picture.”
The
coming
week
will
turn
over
some
crucial
tiles
on
the
market’s
Wheel
of
Fortune,
in
any
case:
Apple’s
hotly
anticipated
developers
event
where
its
AI
strategy
will
be
detailed,
with
the
stock
at
the
exact
top
of
its
one-year
range,
where
it
peaked
twice
before.
Another
CPI
report
to
see
if
the
“sticky
inflation”
or
“normalization”
camps
hold
sway.
And
a
Fed
meeting,
with
an
updated
collective
projection
of
monetary
policy,
as
the
central
bank
approaches
a
full
year
with
rates
on
hold
at
the
presumed
cycle
high,
a
stasis
acceptable
to
markets
so
long
as
the
U.S.
economy
overachieved,
corporate
profits
recovered
and
the
promise
of
an
eventual
rate
cut
remained,
to
date,
plausible
if
not
imminent.
