The market is broadening and it’s time to look beyond megacap tech. Three charts show why
The secular bull market is ongoing and becoming more widespread with participation from stocks in areas outside of tech and energy.
TL;DR
- Investors should exercise caution during the late August period, as market noise can be overstated.
- Conflicting market signals do not necessarily indicate an end to the bull market or a significant rotation away from growth stocks.
- Recent market data, particularly three ratio charts (SPY/RSP, QQQ/QQEW, MAGS/QQEW), suggests that mega and large-cap stocks are not currently leading the bull market.
- The market is broadening, with increased participation from leading equities in sectors beyond technology and energy.
- Technology stocks have driven a significant portion of the S&P 500's gains this year, but this leadership may be changing.
- Active investors should consider exposure to sub-megacap names and look beyond the largest companies for opportunities.
- The author's firm is increasing its weighting in energy and looking beyond MAG7 and hyperscalers for alpha-generating stocks in other sectors.