The S&P 500 is on the cusp of another record. How long can this bull keep

A week removed from a brutal payroll report that triggered worry over a tapped consumer and a trapped Federal Reserve, the broad stock indexes are back at the cusp of all-time highs, market volatility has returned to year-to-date lows and some investors are calling off the August hurricane watch. The S & P 500’s 2.4% gain last week and the Nasdaq 100’s 3.7% ramp to a new record was a matter of investors staying out of danger by hiding behind their big brothers, the mega-cap giants that have long acted both as defense and aggression in this bull market. The S & P 500 added a bit over a trillion in market capitalization during the week, and $400 billion was kicked in by Apple alone, which went from conspicuous laggard to market redeemer after a pledge to invest an incremental $100 billion in the U.S. seemed to exempt it from stiff tariffs on India-made iPhones. Sidestepping hazards has become an expert bit of footwork learned by this market. Can the earnings and macro hold up? The acute worry prompted by last week’s steep downward revisions to payroll growth since the spring was allayed by resurgent market expectations of a Federal Reserve rate cut in September, abetted by a chorus of more dovish rhetoric. This is a typical and perhaps rational response, though won’t necessarily stay unchallenged. Barclays U.S. equity strategist Venu Krishna suggests the market by early August had grown a bit complacent toward the macroeconomic trajectory, before investors were jolted to attention by the weak July payroll report a week ago Friday. He suggests, sensibly if not surprisingly, that, “Going forward, we think equities need support from both earnings and macro to continue working at these levels, which is complicated by the still-evolving tariff backdrop and challenging August seasonality.” Meantime, a dozen S & P 500 stocks fell more than 10% last week, nearly all on poorly assessed earnings or outlooks, with Eli Lilly disgorging 18%, ON Semiconductor falling 16% and digital-ad marketplace Trade Desk collapsing 37%. The severe punishment of companies missing either official forecasts or investors’ informal expectations has been a popular talking point in recent months, with Bank of America calculating that companies falling short on both revenue and earnings have seen their stocks lose more than triple the average amount seen over the past 25 years. Which speaks to the market having run far, fast and hot for four months, taking share prices far out on the thin branches just as corporate results were reported. And yet, such treacherous action is scarcely visible when looking at the S & P 500, which remains in a solid uptrend, just under 6,400, having flattened out the past two weeks well above what most would view as credible support around 6,150 – which is both the pre-Liberation Day peak from February and near the 50-day moving average. .SPX YTD mountain S & P 500, YTD Few take issue with the chart, but plenty of folks are uneasy about how it’s managed to stay in fine form. Yes, the reasserted dominance of the few heavyweight stocks over the majority is the inescapable issue of the moment, again. Concentration risk Apollo strategist Torsten Slok, whose charts go viral (on a Wall Street scale), notes that Nvidia , at 8.2% of the S & P 500, is larger than any top-weighted stock since at least 1981 — and also likely the most expensive top index component since then on a price-to-earnings basis. Strategas Research ETF strategist Todd Sohn has been pointing out Nvidia’s weight is not far below that of the entire healthcare sector. For sure, six stocks are a third of the S & P 500, the top ten around 40%. It’s a winner-take-most index for a winner-take-most economy, in which AI is the source of most of the investor enthusiasm and AI-related capital spending is the key marginal source of GDP growth. These concentration issues shouldn’t be dismissed as irrelevant or without risks, but they’re not in themselves an indictment of the credibility or staying power of this market advance. And the prevailing anxiety around this arrangement among professional investors might be working to maintain a helpful reservoir of skepticism the tape can perhaps keep feeding from. The half-dozen biggest stocks are trouncing the field largely because they are the source of nearly all earnings outperformance. Granted, the equal-weighted S & P 500 over the past three years has lagged the annualized total return of the market-cap-weighted S & P 500 by seven percentage points (16.9% to 9.5%) but hey the equal-weight has returned 9.5%. The concern, of course, is that this is the equivalent of overdoing one of those now-trendy max-protein diets: It’s based on a core of solid research about building healthy muscle, but too much protein can…