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AFTER WALL ST'S "UNHEALTHY' RALLY", ROTATION IS COMING

While Wall Street's recent surge has erased Europe's outperformance this year, the rally itself stands on a narrow foundation, driven by just a handful of stocks - a situation which LFG+ZEST considers unhealthy.

"A narrow market is never a healthy market," says Alberto Conca, chief investment officer at the Swiss asset manager.

He points out that since early April, just 31 stocks were responsible for 100% of the S&P 500's performance, with five mega-cap companies driving nearly 80% of the gains.

The rally was overwhelmingly concentrated in tech and media.

Microsoft MSFT.O and Nvidia NVDA.O alone accounted for 60% of tech's contribution, he adds, while only four stocks including Meta META.O, Netflix NFLX.O and Alphabet GOOGL.O made up 98% of the gains in media.

So, what should investors make of this?

For the short term, say over the next two to three months, Conca anticipates "continuous rotation between winners and losers", which will result in more internal volatility and little progress at the index level.

For more, read this: European stocks' 2025 outperformance is over, but don't forget the euro

(Danilo Masoni)

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