The Stock Market Rally of 2024: A Look at Market Breadth and Performance

The year 2024 was anticipated to bring a broadening of the stock market rally on Wall Street, but so far, that prediction has not come to fruition. Instead, the spotlight has been on tech giant Nvidia (NVDA), which alone has accounted for a significant portion of the S&P 500’s gains this year.

Despite hopes for a more diversified market rally, recent data on earnings and economic surprises have put a damper on those expectations. Morgan Stanley’s chief investment officer Mike Wilson pointed to the Citi Economic Surprise Index, which has been trending lower throughout the year, reaching its lowest level in over a year. This decline in economic data has led to a focus on large-cap companies that have been able to weather high interest rates and slowing economic growth.

Investors have gravitated towards companies like Eli Lilly (LLY), Chipotle (CMG), and Costco (COST), all of which have outperformed the broader market in 2024. Wilson noted that while this trend may continue for certain stocks, it is unlikely to extend to small-cap companies at this time.

Despite the narrow focus on certain sectors of the market, Wilson highlighted that this environment can persist without causing broader market declines. Looking ahead, Wilson suggested that historical data indicates that even during periods of narrow market breadth, returns can still be positive in the following months.

As Wall Street navigates through this market environment, investors will be closely watching to see if the trends of 2024 continue to shape the trajectory of the stock market rally.