Here’s a wild stat: The stock market has added more than $3 trillion in value since its low-point this same month.

The S&P 500 is now on its best win-streak of the year.

Today’s edition unpacks a notable piece to the puzzle: Tech stocks may be looking too frothy for their own good.

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2024 vs. 2000

There is a cautionary tale unfolding in the stock market right now. 

As the top of the S&P 500 has become heavier and more concentrated, investors’ expectations for a pullback have only dwindled. 

The five biggest names in the S&P 500 — Amazon, Alphabet, Nvidia, Microsoft, and Apple — accounted for a record 29% of the index’s market cap at the end of July. 

Meanwhile, during the peak of the dot-com bubble in the early 2000s, the top five tech stocks made up “only” 18%, according to data from Bank of America’s research team.

Those figures alone illustrate how the bulls are running the show.

The story becomes more intriguing once you realize the bears have increasingly gone underground as market concentration has narrowed. 

Data from research firm S3 Partners shows the number of short positions — that is, bets that a stock price will go down — for Magnificent Seven names excluding Nvidia have shrunk over recent months. 

That trend, said S3 analyst Leon Gross, has corresponded with a jump in long-term positions in the tech sector, as measured by Nasdaq 100 futures. 

The increased bullishness for longer-term positions is also evident in the open interest for the Magnificent Seven.

Calls are now more prevalent, Gross said, whereas puts usually dominate. 

Generally, investors use call options when they think a stock will go up, and put options when they think a stock will go down. 

Not for nothing, Roundhill’s Magnificent Seven ETF has roughly doubled the returns of the S&P 500 over the last 12 months, at 54% versus 27%, respectively.

In short, bull and bear bets have moved in opposite directions in the second half of the summer, even as certain components of the market look historically troubling. 

It’s also true, however, that investors have plenty to cheer for. 

No one is guessing “when” or “if” for a Federal Reserve rate cut anymore. Instead, it’s “how big.”

Plus, inflation continues to cool at a steady clip, corporate earnings look good, and stocks have already had a banner year.

Nearly every firm on Wall Street continues to tell their clients not to miss the ride up. 

“With some 15-20% earnings growth expected for the tech sector over the next six quarters, we see a compelling risk-reward outlook for global tech,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.

“We believe AI should continue to drive growth in the years to come, and investors should ensure they have sufficient allocation to beneficiaries in the semiconductors and software industries.

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Elsewhere:

📈 Stocks have climbed 8 straight days. Both the Nasdaq and the S&P 500 are riding the same winning streak, with traders gearing up for Jerome Powell’s Friday speech at Jackson Hole. Strong retail sales and jobless claims data have soothed the jitters from earlier in August. Upbeat earnings from Walmart didn’t hurt either. (CNBC)

🚀 Nvidia is poised for more stellar earnings. The chip-maker has blown away Wall Street’s expectations for multiple quarters in a row, and analysts expect more of the same when it reports Q2 results on August 28. The team at Wedbush, for one, still sees Nvidia as the leader in what will end up being a $1 trillion tidal wave of AI spending. (Business Insider)

📉 Trump Media stock fell Monday as the Democratic National Convention kicked off in Chicago. Shares in the Truth Social parent company — in which the former president is the biggest investor — hovered near its lowest price since merging with a shell company in March. The stock has finished in the red for seven trading sessions in a row. (Barron’s)

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