Most were taught that money will ultimately gravitate to the sector or companies that present the greatest value with the least amount of risk.
Considerable attention has been focused on the massive concentration of wealth in five or ten companies. Five names comprise a record of over 28% of the S & P and ten names comprise a record 35.7% of the S & P 500 capitalization, far exceeding the previous record by a factor of two.
To place this massive concentration of wealth into perspective a one percent move in NVDA is equivalent to the value of Delta Airlines or Dupont. A two percent move is greater than the value of GM or PayPal.
Little attention has been paid to the difference in value between the S & P 500 and the Russell 2000. The Russell 2000 is trading at the largest discount to the S & P 500 since at least 2000. The last time this “small cap index” made a new high was two years ago, the third longest stretch on record.
Earnings, however, are accelerating and exceeding expectations. Bloomberg writes that 52% of companies in the Russell 2000 exceeded estimates during the first quarter of 2024. This is close to the record of companies exceeding estimates of 53.5% that was achieved in 2013.
The Russell 2000 is trading at 18.4x earnings or 0.1 standard deviations above its average.
Many years ago, most were taught a growth company was one that was under discovered, earnings were accelerating and trading at a market discount. Against this definition, how can a $3 trillion company be regarded as growth, one that is vastly over owed, overvalued and is a household name.
Markets Friday were nervous as concern over a political crisis in France deepened. Equites were mixed and Treasuries nominally advanced.
The economic calendar is comprised of retail sales, industrial production and capacity utilization, inventory data, the index of leading economic indicators and several housing statistics.
Last night the foreign markets were mixed. London was down 0.01%, Paris up 0.24% and Frankfurt up 0.05%. China was down0.55%, Japan down 1.83% and Hang Seng down 0.03%.
Futures are flat as French markets stabilize under assurances of Le Pen stated she would work with the Macron Administration, The 10-year is off 5/32 to yield 4.25%.
