NVIDIA leads the rallyUS stock index futures were all pushing higher this morning following yesterday’s Juneteenth holiday. Today’s move took the NASDAQ 100 and S&P 500 to fresh all-time highs, while the Dow and the mid-cap domestically focused Russell 2000 remain somewhat adrift of their own best levels. Looking at individual equities, all the ‘Magnificent Seven’ are firmer in early trade. Once again, NVIDIA is the standout performer, having added 4% earlier on to take it above $140, and to yet another record high. As usual, there are concerns about the US market’s lack of breadth with so much of the overall performance concentrated in the stock price of a few corporations. In fact, the five biggest companies by market capitalisation in the S&P 500 account for nearly 30% of its value. The size and outperformance of this select group is reflected in its valuation which is way above that of the rest of the constituents. According to FactSet, the forward twelve-month P/E for the S&P 500 is 21, which is itself above both the five-year (19.2) and ten-year (17.8) averages. Yet the forward P/E for the five market leaders is 31. This is certainly unbalanced. But what it tells us about where the market goes next is far from clear. These giant corporations can continue to lead and drive the rest of the market for longer than most of us can imagine. How these imbalances get rectified is also something that is unknowable, although we can all have a pretty good guess. While a correction looks long overdue (how many times have I written that this year?), it will need a catalyst. But for now the bulls have the ball and they’re certainly running with it.
