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The great broadening is not an impending phenomenon. The market is telling us that it’s already here.
In the chart below, I’m showing you the price ratio between the Mag7 and the other 493 stocks in the S&P 500.
When the line is rising, the Mag7 are outperforming the other 493 stocks.
When the line is falling, the Mag7 are underperforming those same 493 names.
Now take a look at what’s been happening recently.
See the sharp move lower? That’s the Mag7, the stock market leaders of the past few years, lagging behind the other 493 stocks in the S&P 500.
But before you get bearish, like I almost did after I looked at this chart, let me ask you a question.
If I showed you the chart above and then simultaneously told you the S&P 500 was hitting new all-time-highs, would you believe me?
I wouldn’t believe myself.
But that’s exactly what is happening.
This price action is being made possible by the very sectors that have lagged over the past few years.
Cap-weighted Financials, Industrials, and Materials all making new 52-week/All-Time highs.
Equally-weighted Financials, Industrials, and Materials all making new 52-week/All-Time highs.
Equally-weighted Tech just closed at a new all-time-high.
Even the airlines are breaking out of a massive base.
And trust me, the planes are plane-ing. I can see them from my window in Long Island City, Queens as I write to you. Another one just took off. LaGuardia is humming.
My message to you today is simple: the story isn’t about “narrow leadership” anymore. The story is about participation and a broadening market.
Isn’t that what bull markets are made of?
That’s all for today. Happy New Year and thank you as always for reading.