Coming into this week, the S&P 500 had put together an impressive string of new highs.
Not only did the index close at new highs for nine straight weeks following the March lows, but seven of those weeks corresponded with new all-time highs in the index.
But as the headline indexes churned higher, growing evidence of weakness under the surface began to emerge, which was highlighted by Michael Hartnett, Chief Investment Strategist at BofA Global Research, whose commentary has been making the rounds of late.
Hartnett flagged the lack of broader participation in the rally, noting that only 20 stocks in the S&P 500 hit their own new all-time highs last Friday, a number that inauspiciously matches the market conditions last seen in March of 2000, near the peak of the dotcom bubble.
In their own coverage of the note, CNBC put together a table of stocks that closed at all-time highs, and the majority of those stocks (13 of the 20) were AI-related, meaning that we’re in the midst of an incredibly narrow rally that’s being driven increasingly by speculative high-flyers.
As a counterpoint to the March 2000 comparison, it’s important to remember that this isn’t really a new development. Aside from the very specific figure of 20 new highs, the bull market off the October 2022 lows has regularly faced criticism for narrowness.
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We spilled plenty of ink (and spent our fair share of podcast hours) saying some variation of “the market rally needs to broaden out, or it could peter out,” this time last year.
This Morningstar article from July 2025 does a good job of recounting the conditions at the time and cites analysis by Goldman Sachs that laid out two paths forward, either a “catch up” or a “catch down.”
The catch-up scenario would have seen outperformance by the broader market and underperformance by mega-cap tech leaders, while the catch-down scenario would have seen a sell-off in growth-y tech stocks with less selling in the rest of the market.
The intervening year has more closely matched the catch-up scenario, but it hasn’t hit the mark exactly. Growth and value stocks have both performed quite well, with the Vanguard Growth Index Fund ETF (VUG) up 24.8% in the last year, while the Vanguard Value Index Fund ETF (VTV) has risen by 24.3%.
So growth has continued to lead the way, but it’s done it in fits and starts with plenty of rotation, from software to AI-related data plays to semiconductors, and so on.
There have also been plenty of moments of exuberance that are worth keeping an eye on, like semiconductors more than doubling in a year or massive 10% or 15% earnings-induced moves from old-school tech companies that previously felt like afterthoughts (Dell (DELL) and Hewlett Packard Enterprise (HPE) spring to mind).
Cabot’s Chief Investment Strategist Mike Cintolo laid out his take on the market these days in a recent article, and it’s worth a read if you haven’t seen it already.
But, to paraphrase, Mike is bullish on the market over the long haul and acutely aware of the risk of some short-term turbulence.
His real marching orders, though, are to make your trading decisions based on the evidence in front of you, not the eye-catching headlines.
Don’t plow your entire portfolio into stocks that have gone parabolic, and don’t sell everything wholesale because a few of the leading stocks have gotten stretched.
If you’d fled the market the last time we faced a narrow rally, you’d have missed out on a lot of upside over the last year (or two, or three).
But that doesn’t mean you can’t play it smart, capture some profits, and keep your risk-taking in check in case we hit some turbulence.
And if you’re interested in keeping closer tabs on how Mike is approaching this market, consider a subscription to Cabot Growth Investor.
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