US Markets: A Fragile Euphoria Amid High Concentration
The question echoes like a mantra with every new Wall Street record: "Is it really different this time?" Since April, major US indices have been reaching new highs without a significant pause. However, beneath the smooth surface of a nearly uninterrupted rise, the market is showing signs of asymmetry rarely seen: bad news barely has an impact, while the slightest positive development triggers massive buying waves. It's a situation that both puzzles and raises concern.
When Asymmetry Becomes the Rule of the Game
The latest example is striking. On October 7, as soon as the first rumors of a political agreement to end the shutdown began circulating, US markets surged strongly. Yet, throughout the entire period of the government shutdown, indices showed no signs of concern about its economic consequences. The real economy was at a standstill, but Wall Street seemed indifferent. And as soon as the crisis appeared to resolve—at least on the surface—euphoria immediately resumed.
This episode is part of a trend observed in recent months. Bad news causes only minor and temporary adjustments at most. The Fed's hesitations over a possible rate cut in December, unfavorable data from the Challenger report on layoffs, or the ADP figures indicating an average loss of 11,250 jobs per week in the private sector at the end of October would have, in a typical market, been enough to create a cautious atmosphere. Here, they resulted in only a slight uptick in volatility, quickly erased.
This asymmetry, where growth is fueled by political or psychological signals and bad news is absorbed painlessly, is one of the hallmarks of a market that has become extremely complacent. A market that reacts more to the resolution of a problem than to its presence.
Why the Rise is Based on Narrow Ground
This phenomenon would be less worrisome if the rise in indexes was based on a broad foundation of stocks. But it's quite the opposite. The structure data of the S&P 500 reveals an extreme concentration: during the recent records in October, just over 50% of stocks were trading above their 200-day moving average. In other words, only half of the market is truly participating in the rise.
The situation is even clearer in terms of market capitalization. The 10 largest stocks in the S&P 500, including the renowned « Magnificent 7, » now account for 42% of the index's total capitalization. They concentrate 30% of the profits. This is an outstanding performance, but it mainly highlights the index's increasing reliance on a few tech giants.
This concentration is accompanied by another phenomenon: a massive resort to debt. According to the document's data, the amounts raised by Apple, Microsoft, Alphabet, Meta, and Nvidia in 2025 are seven times higher than the average of the previous three years. These tech giants are rapidly financing massive investments in artificial intelligence, further fueling bullish sentiment.
However, the rise in indexes masks another signal: valuations. The S&P 500 now displays a forward P/E ratio of over 23, comparable to the peak of the post-Covid bubble and just shy of the level during the internet bubble. Admittedly, the Nasdaq 100 is far from its historical excesses (its P/E exceeded 80 in the early 2000s, compared to 38 today), but this argument is misleading: there are many intermediate levels between no bubble and the internet bubble. The post-Covid bubble showed that a bubble can lead to deep corrections without reaching the extremes of the 2000s.
Finally, Europe offers a relative contrast, with markets less exposed to tech. Yet, even here, the dependency on American movements remains total: the correction at the end of October to early November demonstrated that the CAC 40, the DAX, or the Italian MIB decline even without local news, simply as a repercussion of American tremors—only to rebound at the same pace.
A Clear-headed Euphoria or a Dangerous Discrepancy?
The phrase « this time it's different » often foreshadows market excesses. The document highlights that while there is no bubble comparable to that of 2000, there are enough elements to question the level of complacency. Investors seem to have embraced the idea that technology—especially AI—justifies high valuations, abundant debt, and a lack of breathing room. The market has become incredibly tolerant.
However, a market driven by ten stocks, indifferent to economic data and hypersensitive to psychological signals, can create an illusion of solidity. The volatility episode at the end of October reminded us that the dynamics can quickly reverse, and European indexes won’t be immune. The current rise of the S&P 500 relies more on concentrated strength than on collective momentum.
History never predicts in advance if we are in a bubble. But it shows that the most vulnerable markets are those that stop heeding bad news.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
