Markets continue to defy reason. Concentration on the magnificent seven stocks, dettachment from economic reality, where rates continue to put pressure on the brakes, and yet gaps continue to open. On the chart below, you can see how the outperformance of US equities vs the rest of the world is approaching 3 standar deviations. But it’s not only the magnificent seven vs the world, it’s also vs other U.S. stocks. While Nasdaq 100 is up almost 40% for the year, the Russell Micro cap is down 11% YTD. That’s a 50% gap in a year! Among sectors, while technology keeps shining (43% up YTD), healthcare equipment or telecomm sector are down 20%ish. Averages are becoming irrelevant when it comes to explain market behavior, it is explained by extremes. And at some point, the gravity pull will start correcting those gaps, as it happened in the past.
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Chart source: Bank of America research
