The chairman of sell-side Wall Street firm Yardeni Research says he sees signs of an expanding bull market as momentum shifts to small- and mid-cap stocks (SMID).
Ed Yardeni say The ratio between the S&P 100 and the S&P 500 may have peaked late last year.
“If so, then the chance of a bubble bursting is much lower now than it was then, when the stock market was much more concentrated in tech names than it is now, according to this ratio.
So instead of a bursting bubble, we may see an expanding bull market.”
Last month, Yardeni switched to an underweight position on the Magnificent 7 stock, arguing that the tech giants are now competing in a ‘Game of Thrones’ environment. This shift marked the company’s first move away from its overweight position in the industry in fifteen years.
Yardeni says in his new analysis that the new position is working so far.
“Until late last year, the Magnificent-7 operated as seven independent kingdoms, protected by vast moats. Each thrived with its own unique monopoly. However, the AI arms race has upended that peaceful coexistence by greatly increasing competition among them. The ratio between the S&P 500 MAGS and to do about it.”
The Wall Street veteran notes that SMID stock has outperformed large caps, though he acknowledges that this development could be a fake-head.
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