Market concentration is at an extreme.
The correlation between equal-weight $SPX and cap-weighted $SPX just hit 0.67—the lowest ever recorded. That means the performance gap between mega-caps and the rest of the market has never been wider.
For context: from 2005 to 2020, this correlation stayed between 0.95 and 0.99. Even during the 2000 Dot-Com Bubble, it never dropped below 0.85.
Since August, the correlation has fallen 0.25 points. That's a massive divergence in a short period.
What this tells you: a handful of names are driving the index while most stocks are doing their own thing—or lagging badly. The market looks healthy on the surface, but under the hood, it's incredibly narrow.
This kind of fragmentation doesn't last forever. Either the laggards catch up, or the leaders roll over. History suggests neither scenario is gentle.
The correlation between equal-weight $SPX and cap-weighted $SPX just hit 0.67—the lowest ever recorded. That means the performance gap between mega-caps and the rest of the market has never been wider.
For context: from 2005 to 2020, this correlation stayed between 0.95 and 0.99. Even during the 2000 Dot-Com Bubble, it never dropped below 0.85.
Since August, the correlation has fallen 0.25 points. That's a massive divergence in a short period.
What this tells you: a handful of names are driving the index while most stocks are doing their own thing—or lagging badly. The market looks healthy on the surface, but under the hood, it's incredibly narrow.
This kind of fragmentation doesn't last forever. Either the laggards catch up, or the leaders roll over. History suggests neither scenario is gentle.