The U.S. stock market exhibits two major contradictions: tech giants repeatedly hitting record highs are driving index gains, yet market breadth has narrowed to extreme levels, while the overall U.S. market has underperformed global markets for 18 consecutive months.
On October 31, Goldman Sachs trader Mark Wilson noted that while the Nasdaq has posted two consecutive months of 5% gains, market concentration has reached historic extremes. On Tuesday, when the S&P 500 rose, the ratio of advancing to declining stocks hit its lowest level on record. This highlights how U.S. mega-cap tech stocks are leading the charge while the remaining 493 S&P 500 components remain stagnant.
More strikingly, despite the stellar performance of U.S. tech giants, the broader U.S. market has lagged behind global peers and failed to generate any excess returns over the past 18 months. This reflects two key 2025 market trends: a weaker U.S. dollar and the recovery of non-U.S. markets like Germany, Southern Europe, Japan, and South Korea—though these lack the buzz of AI narratives.
Wilson argues that persistent U.S. market narrowing will challenge many investors' performance, but the current global market breadth is impressive and likely to continue, supported by valuations and positioning.
**Tech Giants Race Ahead as Market Narrowing Hits Extremes** October's data clearly shows the concentration of U.S. stock gains. The "Magnificent Seven" tech stocks significantly outperformed the remaining 493 S&P 500 components, which were flat for the month. The seven giants have extended their lead over the index to new highs, cementing their role as the market's core narrative.
This narrowing trend is growing more extreme. During Tuesday's S&P 500 rally, the advance-decline ratio hit its worst reading ever. Despite the Nasdaq's back-to-back 5% monthly gains, market breadth continues deteriorating.
Wilson attributes the tech giants' resilience to sustained AI investments. As previously reported, Amazon and Google's cloud businesses are accelerating growth, Microsoft maintains a 39% growth rate, and none show signs of slowing spending. Meta faces investor scrutiny over ROI proof this quarter, but competitive pressures make spending cuts unlikely—its record $125 billion bond demand confirms ongoing investment capacity. While stock reactions could act as a constraint, if Meta shares don't plunge within a week, the debate will remain unchanged.
Post-Q3 earnings, the Magnificent Seven may raise 2026 capex plans by $60 billion. Against this backdrop, NVIDIA becoming the first $5 trillion market cap company seems inevitable.
**European Markets Quietly Consolidate as Global Breadth Supports Momentum** While Asian markets grabbed headlines this week, Wilson observes meaningful shifts in Europe. Airbus, Thales, and Leonardo announced a satellite business merger to create a pan-European leader—a small but significant step. Telecom consolidation continues, with new deals in the UK and Italy. These aren't "AI winners" but traditional sectors where AI efficiency gains should materialize.
Italian utility ENEL is just beginning to ride the "AI-powered grid" theme, with valuation upgrades and EPS momentum pushing shares to 12-month relative highs. European large-caps are shaking off year-to-date currency drags, with Airbus, ASML, and ENEL all hitting 12-month relative highs.
Goldman's Asia team maintains that dollar trends still support regional EPS expectations and broad equity performance, with China GDP forecasts revised up again. Wilson concludes that the current global market breadth is remarkable and likely to persist, backed by positioning and valuations.