Thierry from arvy
CFA, Co-Founder & CIO of arvy, Quality Investing
Equal-weight S&P 500 stocks may be starting to beat the cap-weighted index after a decade of losing, a turn the concentration trade is positioned against. The RSP/SPY ratio just hit its lowest level ever, below the 2020 panic low, then knifed below the 2025 low and rallied straight back, how bottoms start on a weekly chart. About 20 stocks trade at peak valuations while 480 are priced for nothing. One weekly candle is a hint, not a trend, so confirmation is needed. x.com
The S&P 500's elevated P/E masks concentration in just a few stocks, making index exposure less appealing than selective stock picking for risk and reward. Its P/E is well above the ten-year median; digging into individual constituents looks more sensible than buying all 500. x.com
The cap-weighted S&P 500 remains exposed to tech and AI unwinding because technology still weighs more than at its 2000 peak. Its tech weight has slipped from a record 40% two weeks ago to 37.6%, but the 2000 peak was about 34%, making further unwinding most likely. x.com
Strong corporate profit margins may make the S&P 500 better value than traditional P/E ratios suggest, despite elevated stock prices. Per Bloomberg, its P/E-to-profitability ratio is at its lowest in nearly 14 years, last seen around 2012. Wall Street might be overlooking something important. x.com
The AI-led S&P 500 peak will likely end somewhere between 2000 and the Nifty Fifty: painful, but not a 34-year Japan-style wait. Breadth is ugly, with record index highs while most stocks bleed; @RestlessCentaur notes over 70% of S&P 500 stocks are down more than 10%. Today's leaders trade around 30x forward earnings, while the 2000 and Japan tops were two to three times pricier. x.com x.com x.com x.com x.com
The S&P 500's heavier semiconductor weighting makes its coming pullback likely larger than the 4% decline in the comparable 1995 period. Its current 16-17 week cycle looks more like November 2025 to March 2026 than the last bullish cycle, pointing to at least the lower Bollinger band in November, with a cycle low due in the month's second half. x.com x.com
Rising S&P earnings revisions and a Nasdaq valuation far below the 2000 bubble level argue against a bull trap in US large caps. Nasdaq trades at 18x forward earnings versus over 80x in 2000. Positive breadth divergences, record short ETF exposure and put volume, and semiconductors waking up add to the case. In all 19 post-midterm instances cited, markets were very green over the following 12 months. x.com x.com
The S&P 500's rejection of new all-time highs after seven weeks of bearish trading, itself following nine bearish weeks, is not what a healthy market does. But $762.70 support has not broken, and institutions are soaking every dip on record buy volume. The bearish case remains qualified: the weakness may be short-term trading noise. x.com
Rotation from growth into value is bearish for the S&P 500 in the near term. That normal shift prompted a defensive stance given growth-heavy portfolio exposure, not a bearish call on the broader stock bull market. A pullback could form a higher low and offer a buying opportunity at key levels. x.com
US stocks are getting cheaper even as they rise, because earnings are booming and P/E multiples are declining, making this the opposite of a bubble. x.com
A new SPY low alongside a lower VIX high often, though not always, signals a near-term reversal. A roughly 30% VIX jump makes a shallow rally likely Monday or Tuesday, but after breaking below yesterday's low following a trend-line backtest, SPY still looks headed for $750 soon. x.com x.com
