1. FAANGM Market Cap 8% of S&P 2013 to 26% 2021

The Lead Lag Report

If you look at the equity markets since the March 2020 recession low (or even back over the past few years actually), the topic of market leadership has probably come up more than once. While many investors are probably satisfied with the fact that the S&P 500 and the Nasdaq 100 are sitting at or near all-time highs, it’s important to know what’s going on under the surface since it can offer hints as to whether the rally might be sustainable or not.

To be clear, there’s no right or wrong when it comes to whether market leadership is narrow or a rally is broad-based. Investors probably believe that it’s better if more sectors are participating in gains, but there’s also nothing to say that stock prices can’t keep pushing higher if only a few groups are leading the way.

We need to look no further than the tech sector over the past several years for evidence of that. The FAANMG stocks – Facebook, Apple, Amazon, Netflix, Microsoft and Alphabet – have been driving market returns for the past decade.

1. Margin Debt 2 Standard Deviations Above Trend.

1.  The market has never run this far this quickly to a multiple this high.  

KCR Concepts-Record Returns & Record Prices:

• The chart shows the rolling annual returns of the S&P 500 since 1963 
• We put the Price to Sales ratio above the years that returned over 40% (the 96th percentile) 
• In the year ending March 1998 the market rose 48% and was valued at 1.8x sales – a level which was a precursor to the final run higher into the peak of the dot.com bubble 
• The 12 months ending in March 2021, the S&P was up 56% – the third highest return in history 
• Post this 56% run the market hit 3.0x sales, valuing the market higher than the peak of the speculative bubble in 2000  

The market has never run this far this quickly to a multiple this high.   Massive stimulus from the federal reserve, record low bond yields and investor enthusiasm have sent equities markets to peak returns and peak valuations.   

1. I golfed the Saturday Morning Before Musk SNL Appearance and Both Caddies were Long Dogecoin.

Charlie Bilello https://twitter.com/charliebilello

1. Inflation Related Stocks Underperformance for Last Month

Equities: Stocks that perform well in a rising inflation environment have underperformed substantially in recent weeks – despite the upside CPI surprises.