Market has big bifurcation between the haves and the have nots, says Bespoke's Paul Hickey

Core Viewpoint - The market breadth for the S&P 500 is at an all-time low, indicating extreme concentration in a few mega-cap stocks, which must change for the anticipated AI revolution to benefit a broader range of companies [1][2][3]. Market Concentration - On a recent trading day, 398 stocks in the S&P 500 declined, yet the index rose by 23 basis points, highlighting a significant divergence between the performance of mega-cap stocks and the broader market [3][4]. - The market cap-weighted index has outperformed the equal-weighted index by over half a percentage point for four consecutive days, a phenomenon that has never occurred before [4]. - Over the past two months, the cap-weighted index has outperformed the equal-weighted index by at least 2.5 percentage points, a trend not seen since 1999, indicating a bifurcation in market performance [5]. Impact of Government Shutdown - The ongoing government shutdown has created uncertainty for smaller companies, leading investors to favor mega-cap stocks as a defensive strategy, which has widened the performance gap between the two indices [6][7]. - The expectation is that once the government reopens, the performance divide will begin to reverse, allowing for a potential recovery in smaller companies [7][10]. Sector Performance - Across most sectors, except for materials, the cap-weighted versions have outperformed their equal-weighted counterparts, with notable examples in consumer discretionary, where performance is heavily reliant on a few large companies like Tesla and Amazon [9]. - The consumer sector is experiencing challenges, with many stocks down, reflecting broader consumer concerns amid economic uncertainty [9]. Future Outlook - There is an expectation of a "boomerang effect" in consumer spending once the government reopens, suggesting that companies leveraged to consumer spending may see a rebound [10].