The US stock market is showing signs of becoming healthier and more balanced, with gains spreading beyond the biggest technology companies, according to the latest Weekly S&P 500 ChartStorm by market strategist Callum Thomas. At the same time, the report says investors should keep an eye on several longer-term risks that could challenge the rally.

One of the clearest trends is that more stocks are participating in the market’s advance. While the market-cap-weighted S&P 500 has struggled to break higher, the equal-weighted S&P 500 has continued to reach new highs, suggesting investors are rotating into a broader range of companies instead of relying on the largest tech stocks. Thomas notes that even the S&P 500 Value Index recently reached a record high, while sectors such as financials and micro-cap stocks have started showing stronger momentum.

The report also points out that the “Magnificent Seven” continue to lag the rest of the market. Rather than seeing this as a negative, Thomas says it reflects a healthier rotation, with leadership gradually shifting to other parts of the market. However, he cautions that investors should watch carefully to ensure the rotation is driven by broader market strength rather than weakness in former leaders.

Still, not everything is moving in a positive direction.

Thomas highlights several areas that deserve closer attention:

  • AI-related stocks continue to show signs of stretched valuations.
  • The US, South Korea, and China all display characteristics associated with speculative market behaviour.
  • A broader rally is encouraging, but elevated valuations could leave stocks more vulnerable if sentiment changes.

For investors, the report paints a balanced picture. The market is no longer being driven by just a handful of mega-cap technology companies, which is generally a positive sign for the current bull market. At the same time, expensive valuations and pockets of speculation suggest that stock selection and diversification may become increasingly important as leadership continues to shift.

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