Whatever the ultimate diagnosis for the market’s present condition, symptoms include “mild discomfort with intermittent fever and chills.” For sure, its overall condition is healthy, in the most broadly observable respects. The S & P 500 made a new record high, its 25 th of the year. The index has now gone 328 trading days without a 2% one-day decline, its third-longest such streak this century. And on the surface, there is a stolid calm that suggests a system in comfortable equilibrium, the market achieving a kind of homeostasis. Four of the past five days last week, the S & P 500 moved less than 0.2%. The fifth day, Wednesday, kicked in the bulk of the week’s 1.3% gain. The CBOE Volatility Index finished back near the 12 level that has defined a recent floor not previously seen since the carefree moment before the Covid crash. .VIX 5Y mountain CBOE Volatility Index, 5 years This display of temperate calm, is, of course, not quite as uniformly steady as the above would make it seem. This is where the feverishness and chills are roughly offsetting one another, sometimes uncomfortably. Nvidia, GameStop fever The overheated excitability of Nvidia , described here at length last week, is tough to escape or dismiss, a $3 trillion market-cap company trading historic daily dollar volumes and accounting for more than a third of the S & P 500’s appreciation in 2024. NVDA 1Y mountain Nvidia, 1-year Thursday saw some $80 billion in Nvidia common stock turn over, well over 10-times the activity in comparably sized Apple and Microsoft. Perhaps this was peak fever, the record date for the 10-for-1 stock split that takes effect Monday? It’s more guess than analytical assessment. And what to make of the sweaty exertions of the GameStop horde, stampeding the shares of the wobbly retailer between 25 and 47 Thursday and Friday, rising on the promise of investor Keith Gill breaking his silence and then falling hard on the lack of a new or compelling thesis for the stock . For now, the relapse of GameStop fever appears a less-extreme case, with rallies more fleeting, the short interest not as heavy and the company itself swamping the market with newly issued shares – following a 45 million sale weeks ago with another planned 75 million, in total amounting to total dilution of 40%. GME YTD mountain GameStop, YTD No doubt, overall volumes in marginal sub-$1 stocks has soared in recent weeks, and retail options activity continues to break records. But it hasn’t become pervasive or indiscriminate, and while overall investor flows into equities have picked up, they are still outpaced by the sums going into money-market vehicles. Decelerating economy? The chills were felt by some of the more cyclical segments of the market, at least for most of last week, when a continued decline in Treasury yields (the ten-year falling from 4.6% in mid-May to 4.28% last Thursday) failed either to improve the breadth of the rally or enliven small-caps, banks and consumer cyclicals. This reflected a heightened sensitivity to signs of an economy decelerating more than desired or intended by investors or the Federal Reserve. Not to make much of such “growth scare” impulses, but a series of downside surprises on manufacturing indexes and housing numbers and the sloppy downside reversals in crude-oil and other commodities were bond-positive and disinflationary but not broadly equity-positive. Friday’s jobs report paired a very warm headline payroll gain of 272,000 in May with a softer household survey in which the unemployment rate ticked up to 4% from 3.9%. Strong enough to push the last remaining bank economists who were projecting a July rate cut to back off that view, but not so strong as to banish worry that the labor market is going beyond rebalancing and into deterioration. The confusion manifests in what remains a split market, the headline benchmark pressing highs with more stocks backsliding than rising along. The S & P 500 is up almost 2% since its closing peak at the end of the first quarter, perhaps the moment of maximum belief in a seamless soft economic landing. The equal-weighted version , however, is 3.4% below its March 28 crest. Bespoke Investment Group last week noted the index had hit its latest new high with the 10-day tally of advancing-vs.-declining stocks negative. It’s the kind of thing that can be made to sound a bit ominous, and no doubt more inclusive rallies tend to be better forward-looking signs of health than narrow ones. But the prior 17 times the index hit a new 52-week high with similarly poor breadth, future returns going out several months were a touch better than average. Market too top heavy? Three stocks together now account for fully 20% of the S & P 500 market value, mocking the notion of diversification and dashing most active investors’ hopes of beating the bogey. Michael Mauboussin, longtime finance researcher, professor and investor now affiliated with Morgan Stanley Investment Management, released a thorough look at stock-market concentration through time, arriving at some interesting conclusions. One is simply that there have been similarly top-heavy markets in the past, which did not always result in poor subsequent performance. Note the early 1960s in this chart (which has data through the end of 2023). Other observations were that concentration tends to accrue during bull markets and to follow superior profit growth. Mauboussin even finds some evidence that times when the market was less top-heavy, it might have been insufficiently concentrated — too diversified — given the subsequent fundamental and share-price outperformance by the stocks that would go on to become super-sized in later years. Still, while there is no single “correct” way for markets to behave, the circumstances under which other groups pick up the slack would probably fit best with the current bull case: continued disinflation that allowed the Fed to trim rates in a deliberate way as the economy held firm and, presumably, the AI excitement kept animal spirits flowing. Scott Chronert, strategist at Citi, captured the crosscurrents at week’s end: “All told, the S & P 500 continues influenced by the structural growth opportunity in generative AI as an offset to mixed macro picture. In the meantime, flows have faded, the Levkovich [Panic-Euphoria] Index remains in euphoria, implied growth expectations have ticked higher while consensus earnings are flattish. The near term set points to some digestion risk ahead, but no change to our ongoing constructive fundamental picture.” The coming week will turn over some crucial tiles on the market’s Wheel of Fortune, in any case: Apple’s hotly anticipated developers event where its AI strategy will be detailed, with the stock at the exact top of its one-year range, where it peaked twice before. Another CPI report to see if the “sticky inflation” or “normalization” camps hold sway. And a Fed meeting, with an updated collective projection of monetary policy, as the central bank approaches a full year with rates on hold at the presumed cycle high, a stasis acceptable to markets so long as the U.S. economy overachieved, corporate profits recovered and the promise of an eventual rate cut remained, to date, plausible if not imminent.