Is the Stock Market Sending a Warning?
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Why are the Nasdaq’s gains being driven by just a few mega‑caps?
We don't just invest in cutting-edge companies. We look at companies with a history of steady growth and companies whose growth cycle has come round again. Because in the real world, you have to look at growth in three dimensions. Monks Investment Trust.
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Welcome to the Meren Talks Money Market Rap, where we talk about the biggest moves in markets this week and what is driving them. I'm Meren Sumset Webb, UK Money Editor at Large.
And I'm John Stevig, senior reporter at Bloomberg and author of the Money to Steal newsletter.
Okay, John, there's a lot going on. There's always a lot going on these days. But listen, one of the things that I want to talk about, and I'm not sure that you agree with me this is a big deal, but I do think it is a big deal, is about breadth in the market. So quite a few people have written about this week, including our very own John Authors, who points out that on Tuesday, Nasdaq went down quite a lot, right? But of that rise, more than half of the rise was down to four companies. All fortune making companies basically micro and sand desk advanced micro devices and video. So Everything else is kind of basically irrelevant to this. Huge concentration. Now we know that isn't new, right? But it just seems to be getting more and more intense that when the market moves, it's just being dragged along by a couple of big companies and everything else is either knocking around at neutral or going down a little bit or really just not doing very much.
And that's not normal. You know, it doesn't happen that often. He looks at it and he says that in terms of this kind of really extended period of outperformance by a couple of big companies. You've got to go back to the late nineteen nineties to see if we all know what happened then, right? Uh this narrowing of performance. Narrow. And the more you look at it, the worse it gets. And he actually John points out a tweet that I was looking at the other day which first made me think, ooh, I'm a bit worried about this uh which was um From just one of the traders on X.
How does market concentration compare to historic narrow‑performance periods?
And so there are two days in history like today when the SP five hundred rallies at least one percent to is in one percent of a new high, and more of its stocks fell to new lows than highs, July twenty-third, nineteen twenty-nine and December twenty-first, nineteen ninety-nine. So both before really, really, really epic. Epic market fails, right? Now, as Jill says, and I agree, it's a very small sample cell, doesn't mean anything, but It doesn't feel good, does it? Having the market led by companies like this and people constantly think, Oh, it's a new higher, it's a new higher, it's a new higher, everything's fine. But underneath everything kinda isn't.
Fundamentally, I agree. And obviously I agree that the market is very, very concentrated, it's it's very pricey. And like any measure that you you pick um really will will show that the SNP is expensive and the Nasdaq's expensive. So I actually don't disagree at all with the fundamental issue we practice, but people talk about it a lot. And quite often it then just goes on to widen out. So whenever you get down to talking about these things which are almost kinda timing devices, um, and that's all because I s I sort of question like, I but does it actually tell us that in three months time the market's gonna start crashing or whatever? I mean to I mean, to be fair, you know, I've I've already got a marker.
I've I've I've produced a little graph in uh my Bloomberg terminal to remind me that the economist had Nvidia on the cover a couple of weeks ago and so I've just got a wee note of that with Nvidia share price. 'Cause that's my kind of chosen timing indicator.
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Chapters
8 chapters
1
Why are the Nasdaq’s gains being driven by just a few mega‑caps?
0:00–2:34
2
How does market concentration compare to historic narrow‑performance periods?
2:34–4:55
3
What warning signs are hidden in the recent S&P 500 rally patterns?
4:55–7:56
4
Why could the AI boom be limited by data‑center construction bottlenecks?
7:56–10:26
5
How are unused AI chips highlighting physical constraints on the sector?
10:26–12:09
6
What are the implications of the UK’s rising public‑debt‑to‑GDP ratio?
12:09–14:45
7
Why is China’s massive gold buying spree significant for global markets?
14:45–16:57
8
How might a shift toward a gold‑backed parallel currency affect the dollar’s dominance?
16:57–20:03