The stock market is deeply split between the S&P 500 hovering near record highs and the majority of stocks in a 16% drawdown. Goldman Sachs notes market breadth has deteriorated to its weakest level since the DotCom Bubble, while Morgan Stanley believes valuations have fallen enough to allow a catch-up if yields stabilize. Deutsche Bank downgraded the tech sector citing crowded positioning. The Russell 2000 is sitting exactly on its 200-day moving average, and the XMAG ETF tracking stocks outside the Magnificent 7 risks a technical breakdown. Only 34% of large-cap stocks have beaten the S&P 500 over the past 12 months, making the market extremely difficult to outperform.
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