The Lead-Lag Report: The Most Deceptive (And Phony) Bull Market In History

While the market hovers near all-time highs, there are a number of signs that this market rally is unhealthy. That doesn’t mean stocks will crash anytime soon. But it does mean that investors should be cautious until some healthy signs improve.

The biggest sign of market sickness? Overall participation. Since late 2022, the market rally has been dominated by a number of big-cap stocks. Notably, they’re tech-heavy as well.

Tech stocks tend to be more volatile. And the concentration of these tech stocks relative to the overall size of the S&P 500 stands at a record high.

Meanwhile, small-cap stocks can’t seem to catch a break. The Russell 3000 index, which holds a number of much smaller stocks shows the danger. Over 70% of those companies continue to trade below their 2021 highs.

Again, the market isn’t at danger of a correction yet. But if there is going to be a correction, it won’t take that many stocks to get one started.

This situation does parallel the end of the bull market in tech stocks in the 1990s. We could still see one last final speculative top. That would involve traders throwing in the towel on a potential selloff now, and joining in tech stocks at all-time highs.

Eventually, the party will stop. For now, it’s simply starting to throw up some warning signs for investors.

To view the full extent of the market’s concentration danger, click here.