Return of the "K-Market"
I have named it a “K-Market” where parts of the stock market are bullish and other parts not so much. Most of the time this type of market is formed where the Big Tech Magnificent 7 stocks are carrying the entire market while the broader market is struggling. This time, even within the Big Tech there are winners are losers.
Let’s first look at the broader markets.
This is the trending heat map using the daily charts. We can see that the large caps are clearly bullish while the small and midcaps not so much. The equal-weight S&P 500 is also not good.
Now we can look at the Big Tech using the same trending heat map and see a similar situation.
I use these 11 stocks as my favorite Big Tech ticker FNGS has the first 10 stocks and the only one it does not have is TSLA. MAGS is the other ticker specific for the Magnificent 7.
We can see that AAPL, AVGO, CRWD, META, NFLX and NVDA are trending bullish. Whereas AMZN, GOOGL, MSFT, NOW and TSLA are actually trending bearish. That is almost an even situation.
So, FNGS has 10 stocks from which 6 are bullish and 4 are bearish. MAGS has 7 stocks from which 3 are bullish and 4 are bearish. That is why we see a little weakness in the MAGS trending compared to FNGS trending.
This slight divergence is seen in the returns as well.
In both the measurements, post elections and 2025 YTD, we can see that FNGS is better.
What about the major market returns to date using these same time frames?
We can see that the Magnificent 7 has strong performance post elections through now. But in 2025 YTD it is really underperformed even worse than the IWM small caps. FNGS on the other hand has been the best in both the timeframes.
I track 46 ETFs. Here are the top 10 performers since the elections.
The IBIT is the most popular spot Bitcoin ETF. While it is the best performing post elections, it has struggled in 2025. ARKK is the overall best performing in both time frames. Interesting to see 3 SPX sector ETFs in the list - XLC, XLF and XLY. The XLY has struggled of late. But the XLF and XLC are still doing fine.
So, where does all the above notes leave us. We just have to keep it simple. Work with the winners and get rid of the losers. Lot of experts have talked about the resurgence of the small and mid-cap markets and also the dominance of Big Tech reducing. As we can see from the above numbers, that has not exactly worked out.
For sure, even within the Big Tech, there are winners and losers. This is not the time to be emotionally attached to any particular stock or sector. We can do that when everything is going up. As we can see, now is not that situation. So, we have to go with the winners.
This week (week 8) is a short trading week. We still do have earnings releases and also the jobs numbers every week. Earnings have been very good and likely the big driver for the large cap stocks doing well. Here is the note from Factset.com:
“At this stage of the fourth quarter earnings season, S&P 500 companies are reporting strong results relative to expectations. Both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above their 10-year averages. As a result, the index is reporting higher earnings for the fourth quarter today relative to the end of last week and relative to the end of the quarter. In addition, the index is reporting its highest year-over-year earnings growth rate for Q4 2024 in three years.
Overall, 77% of the companies in the S&P 500 have reported actual results for Q4 2024 to date. Of these companies, 76% have reported actual EPS above estimates, which is below the 5-year average of 77% but above the 10-year average of 75%. In aggregate, companies are reporting earnings that are 7.3% above estimates, which is below the 5-year average of 8.5% but above the 10-year average of 6.7%. Historical averages reflect actual results from all 500 companies, not the actual results from the percentage of companies that have reported through this point in time.”
I will leave you with that positive note. Have a good week ahead.