Market Call: Investors Broadening Their Horizon

The current bull market started during October of last year. Since then, the bears have been warning that it was a rally in a bear market. That's because most of them expected a recession, and many of them still do. In addition, they've observed that the rally has been narrowly led by the MegaCap-8. The rest of the stock market seemed to be comatose.

Our view has been that the bull market will broaden, which seems to be happening now because investors are more confident that the Fed is done raising interest rates and might start lowering them next year. They also have more confidence in the resilience of the economy since it has averted a recession despite the Fed's aggressive tightening of monetary policy since March 2022.

That confidence can be seen in several indicators of the market's breadth. The ratio of the equal-weight to the market-weight S&P 500 indexes has risen steeply since November 13 (chart).

The S&P 400 MidCap and S&P 600 SmallCap stock price indexes (together a.k.a. the SMidCaps) and the Russell 2000 index have also been outperforming the S&P 500 recently (chart).