The US Stock Market's Narrow Path to a Broader Rally

The US equity market remains concentrated in AI stocks and sensitive to rising real yields. To sustain the rally, investors need a macro environment where growth remains resilient while energy-driven inflation pressures subside.

Key Takeaways

• 1.The US market rally is currently 'low-quality' and narrow, driven by AI-adjacent names and positioning rather than macro narrative.
• 2.Rising real yields, driven by energy shocks and resilient growth, are pressuring equity multiples and tightening financial conditions.
• 3.A broader rally requires a 'delicate macro mix': subsiding energy shocks paired with resilient growth to allow cyclicals to catch up.

Table of Contents

• US Equity Returns Have Widely Varied by Sector This Year
• Stronger Growth and Inflation to Support Real Yields