More Stocks Join the Surge, Signaling More Upside Ahead

One long-standing concern among investors has been that the U.S. stock market’s gains have concentrated too heavily on the “Magnificent 7” mega-cap tech companies, leaving the rest of the market behind. This high concentration raises worries about the market’s long-term stability.

However, recent trends suggest the rally is broadening across more sectors, easing those concerns.

The number of stocks in the benchmark S&P 500 trading above their 50-day moving average has recently risen to levels not seen since last fall—before Donald Trump’s election victory triggered a year-end rally.

Another breadth indicator, which tracks the number of rising stocks versus falling ones, hit a new high on Friday.

While large-cap tech stocks remain in the spotlight, their continued price surge has made them increasingly expensive, prompting investors to seek value in other overlooked corners of the market.

“Nobody disagrees that the Mag Seven are just extremely expensive,” said one strategist. “People forget there are sectors of the market that are on sale—that are cheap.”

As market breadth improves, diversified investors are starting to reap rewards. Jamie Cox, managing partner at Harris Financial Group, has recently seen his all-weather strategy—which includes defensive stocks, financials, and large-cap international names—begin to pay off.

Cox, who manages $1.2 billion at Harris, said more clients are now looking to diversify away from only holding the top-performing tech names. “That lends itself to owning different things than just the most effective of the tech stocks,” he said, citing defense contractors like Lockheed Martin and RTX Corp. “You buy the less-aggressive, more tried-and-true, boring stocks.”

Wall Street generally views expanding market breadth as a sign of a healthier market and a sustainable rally.

Several investment banks believe the broader participation in the U.S. stock recovery indicates that gains may continue in the second half of the year.

“We’ve seen this before: big tech leads and the market follows,” said Adam Turnquist, chief technical strategist at LPL Financial. “It seems like we are dusting off that playbook.”

Tom Essaye, founder of research firm Sevens Report, added that as long as conditions remain stable, the U.S. stock market still has plenty of room to rise.

He said market breadth has improved recently because investors who missed the historic rally in tech stocks are now looking for opportunities in other sectors—a classic case of “FOMO” (fear of missing out) trading.