A small group of tech stocks is driving the market rally — why that's 'not a flaw'

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Mike Wilson 뉴스

Stock Market,Goldman Sachs,Tech Companies

Wall Street strategists are arguing the stock market rally's next leg higher doesn't need broader participation.

While it might seem concerning to have too much riding on a handful of stocks, strategists say the trend may not be a bad thing for markets.

Wilson found roughly 20% of the top 500 stocks are outperforming the broader index over a rolling one-month period. This is the lowest percentage of companies outperforming in Wilson's dataset dating back to 1965. Wilson argued that when considering the impact of high interest rates on corporations, this makes sense. Investors have flooded large-market-cap stocks that have held up well in the higher rate environment and are seeing earnings grow more than their smaller peers.reflect similar sentiment. Three Wall Street firms cited tech outperformance as part of the reason the index is doing better than they initially thought this year.

"We underappreciated the degree to which those earnings would lift those few stocks and the degree to which those few stocks would drive the rest of the market, and that's basically what we're adjusting for," Goldman Sachs equity strategist Ben Snider told Yahoo Finance. "The beauty of the S&P 500 index ownership in general, which is when a few companies perform really well, they can drag up the whole index," Snider said. "And we're seeing that right now. So I think most investors who own the S&P 500 are very happy with what's happened, even if it means their underlying portfolios are more concentrated," Snider said.

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