Equity Market Breadth & Sentiment (with Tom Keene, Paul Sweeney)

Kevin Gordon highlights a divergence in market breadth with the average stock underperforming due to AI hype in semiconductors, but sees this as a norm in concentrated markets. He notes attitudinal sentiment is skittish despite stretched fund flows, suggesting room for upside. Earnings breadth exists but magnitude is skewed to mega-caps.

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Charles Schwab 7.8
Asset Manager $890.00B
Kevin Gordon 7.5

Equity Market Breadth & Sentiment (with Tom Keene, Paul Sweeney)

ndx

Gordon notes AI hype in semiconductors is driving narrow market but divergences have resolved positively. Earnings support the market, and sentiment has room to stretch higher, suggesting cautious upside for tech.

rut

Gordon mentions the new norm of concentrated markets but sees potential for broadening. He notes small-cap earnings are starting to exceed large-cap, which could drive rotation into small caps.

Tom Keene

What chart did you put together this morning? What's on your mind for the equity market?
Kevin Gordon

Central to our mid-year outlook is the divergence in breadth: percentage of companies above 200-day moving average and outperforming S&P 500 on a rolling three-month basis remains weak due to another bout of AI hype in semiconductors. This isn't a horrible omen; these divergences have resolved positively in the past.
Paul Sweeney

We have very active equity new issuance, mega deals from Alphabet, IPOs like SpaceX. What does that tell you about this market?
Kevin Gordon

The sentiment environment is getting frothier, but when speaking with investors there's elevated skittishness around mega-cap IPOs. Attitudinal sentiment doesn't match behavioral sentiment (stretched fund flows into tech and semis). This lays groundwork for more room for sentiment to stretch to the upside.
Tom Keene

How do you respond to people who say 'we love your optimism but we're scared stiff'?
Kevin Gordon

We don't get a lot of clients exhibiting fear, especially those working with an advisor. The biggest split is with newer retail investors who show skittishness around big drops or stocks going up 20-30% in a day. The dominant question I get is concerns over AI in the labor market.

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