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1. The picture of which sectors are leading in European and US markets is diverging like never before.

In Europe, value stocks and small caps have led the rally, helping to broaden the gains.

US returns have been all about mega-cap growth stocks, combined with speculative trading in themes like most-shorted and meme names.

Returns for the S&P 500 now exceed those by the Stoxx Europe 600 this year in local currency terms, after a stellar catch-up by the US benchmark.

But the move has been almost entirely driven by a handful of stocks.

2. Europe has a healthier breadth and diversification than US.

“In Europe, the market breadth has been notably strong this year,” say Goldman Sachs strategists led by Sharon Bell.

“It suggests that a larger number of stocks within the market are participating in the price move, indicating a healthy and sustainable trend.” Meanwhile, the US market’s resurgence since April was powered by a narrow group of Big Tech names that gained momentum during another strong earnings season, resulting in significantly weaker breadth.

That’s much less of a worry in Europe. The 10 largest companies represent only 17% of the Stoxx 600, and even that dominance has faded recently. By contrast, concentration is near record levels in the US, with the 10 largest companies representing 39% of the S&P 500. In the MSCI World gauge, the figure is 28%, creating a diversification problem in global portfolios.

“Measures of diversification hit new lows in both MSCI World and the S&P 500 indexes,” says Societe Generale strategist Andrew Lapthorne. He points out that the same 10 stocks also account for a third of the S&P 500’s earnings and a fifth of global profits. “Such concentration might look impressive on paper, but it comes at a steep price: the erosion of diversification, leaving portfolios increasingly exposed to a narrow slice of the market’s fate.”

3. Emerging-market stocks rise to the highest level since November 2021 as prospects brighten for Fed cuts and China unveils a plan to stimulate almost $700 billion of fresh credit.

4. China and India continue to have deflation.

Analysts expect more aggressive monetary easing from the Indian central bank, supporting reflation of the economy.

5. Global new nuclear capacity by 2050 will be 586.8GW, up 53%.

Asia, especially India and China, will still be the centre of growth based on the current pipeline. Based on these capacity projections, capital investment will be around US$2.2 trillion.

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