The current market dynamics present an unprecedented concentration of power and risk. Five tech giants—Microsoft, Apple, Amazon, Alphabet, and Meta—have surged to historic levels, collectively dominating market gains with staggering year-to-date returns. This tech-driven rally has narrowed market breadth, raising concerns about its sustainability and broader market health.
The S&P 500’s volatility metrics are flashing warning signs not seen in a quarter-century, echoing the extreme conditions of early 2018 before the infamous “Volmageddon” episode. Back then, overreliance on volatility products led to market chaos, and today, similar echoes are heard amidst a surge in volatility-selling funds.
What’s truly staggering is the meteoric rise of the “Magnificent 7” stocks since 2020, witnessing a collective surge of over 400%. These tech behemoths now comprise a record 32% of the S&P 500 index, overshadowing smaller companies whose gains have been modest in comparison, highlighting an alarming disconnect.
In this volatile landscape, Nvidia has soared to new heights, emblematic of the tech sector’s relentless climb. Meanwhile, the relationship between Commodity Trading Advisors (CTAs) and US equities reveals extreme exposure levels, prompting concerns that these automated trading strategies could trigger significant selling pressures, as noted by Goldman Sachs.
Amidst these unprecedented market conditions, cautionary signals abound, underscoring the need for prudent risk management and a keen eye on systemic vulnerabilities.
Sources:
The 5 stocks above:
Microsoft $MSFT – 18.9% YTD
Apple $AAPL – 14.7% YTD
Amazon $AMZN – 24.6% YTD
Alphabet $GOOG– 28.6% YTD
Facebook $META – 46.9% YTD📍 Also, you can now track Burry’s positions & copy trade him on the Autopilot app: t.co/qOvYB8mws3 pic.twitter.com/L94UvU9GFP
— Michael Burry Stock Tracker ♟ (@burrytracker) June 13, 2024
Nasdaq
Lets take a look at the monthly ,
Oh my … pic.twitter.com/JKRqWEtO0O
— The Great Martis (@great_martis) June 12, 2024
Breadth is negative on both exchanges.
This is a Tech-only rally now.
The latest buffoonery: pic.twitter.com/wd31qXl1p9
— Mac10 (@SuburbanDrone) June 13, 2024
Over the past 150 sessions, the S&P 500 has returned more than 40 times the standard deviation of its daily changes.
The only time in 25 years it reached this extreme was in January 2018.
Markets suffered through "Volmageddon" soon after that when traders piling into easy-money… pic.twitter.com/UP8vneBM9X
— SentimenTrader (@sentimentrader) June 13, 2024
THIS IS INSANE:
Since 2020, Magnificent 7 stocks have skyrocketed by over 400%.
Its share has recently reached 32% of the S&P 500 index, the MOST EVER.
Meanwhile, the average small-capitalization stocks rose by only 17%.
The disconnect has never been greater. pic.twitter.com/tO8oK8R5ba
— Global Markets Investor (@GlobalMktObserv) June 13, 2024
Nvidia, $NVDA, has hit an all time high.
— unusual_whales (@unusual_whales) June 13, 2024
CTAs vs. US equities. With exposure to US equities at extremes, CTAs would become sellers at the thresholds noted below, per Goldman Sachs pic.twitter.com/LQe1rUx6sG
— Win Smart, CFA (@WinfieldSmart) June 13, 2024
The Fed was uber hawkish, but every putz on Wall Street is saying, "What inflation?"
This inflation: pic.twitter.com/xvxpFVaKQF
— Mac10 (@SuburbanDrone) June 12, 2024