The stock market’s relentless rally has been fueled by a handful of powerhouse stocks, with Nvidia leading the charge with an impressive 80% gain since the start of the year. This surge has pushed the S&P 500 and Nasdaq to record levels, prompting some on Wall Street to raise concerns about a potential bubble.
However, top Wall Street strategists are pushing back against these fears, citing strong quarterly results from big tech companies like Nvidia, Meta, Microsoft, and Amazon. They argue that the market is in a “1995 moment” rather than a repeat of the dotcom bubble, with higher profit margins and proven returns supporting the bullish case.
Market concentration has reached multi-decade highs, with the 10 largest US stocks now accounting for a significant portion of the S&P 500 market cap and earnings. Despite this, analysts believe that the market still has room to run, with positive underlying trends and improving market breadth.
History also suggests that elevated concentration does not necessarily signal a market top, as the S&P 500 has rallied more often than not following past concentration peaks. Analysts at Goldman Sachs point to large swings in momentum and the potential for laggards to catch up, which could interrupt the current rally led by tech giants.
Overall, while concerns about market frothiness persist, many experts remain optimistic about the market’s outlook. As the market continues to evolve, investors will be closely watching for signs of a potential shift in momentum and the emergence of new market leaders.
