When One Story Holds Up the Whole Market
Seven stocks have generated nearly two-thirds of the S&P 500’s return this year, the kind of concentration we have not seen since the dot-com era.
Right now, the market runs on a single narrative: AI as the next productivity revolution.
The question is not whether AI changes the world. It already has.
The question is whether one story can continue to carry $40 trillion of U.S. market capitalization while everyone quietly hedges the same bet.
Equal-Weight vs. Cap-Weight (RSP/SPY). The ratio shows how much recent market strength depends on a handful of megacaps.
You can see the insurance being written:
Index put volumes are elevated, about 55% higher than a year ago.
Gold is holding near $4,000 per ounce even after CPI came in lighter than forecast.
Short-duration Treasuries continue to attract inflows as investors prefer ~3.90% yields and liquidity over duration risk.
If markets truly believed in a limitless AI super-cycle, none of this insurance would exist.
That tension, optimism financed by fear, defines late 2025.
What’s Inside the Letter this Week
Equities: Why the market’s leadership has narrowed to a single trade (and what history says happens next)
Gold: The real reason it’s rallying isn’t inflation; it’s solvency.
Credit: How spreads this tight have always mispriced volatility, and what that tells you about timing.
The Dollar: Why the world’s safe haven is evolving, not collapsing, and what that means for diversification.
I. Equities: Concentration and Fatigue
Five stocks now make up nearly 30 percent of the S&P 500’s weight, and equal-weight indices have lagged by more than 12 percentage points year to date (S&P Dow Jones Indices).
The declining number of stocks holding above their 50-day moving average shows exhaustion.
Breadth is thin, liquidity is selective, and capital remains crowded in the same trade.
Keep in mind, late-cycle markets don’t collapse in euphoria; they stall because there’s nowhere left to go.
Basically, everyone’s fully invested, and no one’s buying new risk.
So, how do we handle positioning?
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