Equities were poised to start the "Santa Rally" off with a bang, but struggled at the end of last week.
The "Santa Rally" is traditionally known as the 7 trading days between Christmas Eve and January 3rd. So far, the S&P 500 Index is negative 1.6% since December 24th. Last week, investors pulled out more than $35 billion from equity funds, which is the largest weekly outflow in more than 2 years. Initial estimates for 2025 were fairly rosy among Wall Street analysts, but the bloom appears to be coming off that rose as the current bull market might be getting ahead of itself.
The concentration in the top names of the S&P 500 has been driven by the FOMO trade and Magnificent 7 stocks now exceed prior asset bubbles in history (even the Dot.com phase).
Since the market bottom in October of 2022, the top ten holdings of the S&P 500 Index account for 59% of the index's gains. In other words, unless you owned those ten names, you probably under-performed the index, which is not normal. The top 3 names of the index - Apple, Microsoft, and Nvidia - comprise the highest weighting of the index over the last 45 years. Concentrations of this type typically lead to pullbacks in equities or worse. Sound asset diversification is the best strategy moving forward as we enter 2025.
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The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.
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