this market is doing all it can to demonstrate the old maxim that familiarity breeds contempt the s  p 500  as all are painfully aware is confined to a tight and anxious range leaving it at the exact level of three six 12 and even 24 months ago the way the benchmark has managed to stay here since march has elicited a constant stream of contemptuous critique for being overly dependent on a smallish handful of giant growth stocks while the majority of the tape languishes even the bigpicture headwinds are familiar echoes of past traumatic episodes the narrow megacap leadership prompting warnings about the nifty fifty and tech bubble the federal debtceiling standoff evocative of the 2011 market minipanic and the persistent bankstress story summoning the 2008 financialcrisis nightmare and yet earnings have been better than most were braced for the economy is slowing but not buckling and the bigcap indexes have so far held well above the october lows clearly the market is captive of strong opposing and somewhat unpredictable currents as the passengers argue over what might get stocks unstuck and in which direction the breathless breadth debate i dove deep into the stark bifurcation of the market here two weeks ago  and the huffing and scoffing at the clustering of strength among the elite few nasdaq stocks has only grown more urgent since wall street is busy citing it as not only extreme but dangerous with one firm on friday insisting that without 20 stocks riding the ai wave the s  p 500 would be down 2 this year instead of up more than 7 leaving aside the somewhat arbitrary nature of assigning what proportion of a net change is owed to certain stocks one can play this game many ways excluding financial stocks for instance the s  p 500 would be up 11 for the year its also not clear what the precise complaint is yes broader rallies in general are stronger more durable ones cyclical sectors are ragged with semiconductors retail materials and heavyequipment makers giving up earlyyear strength consumer services and homebuilders are holding in well so far the equalweighted s  p 500 is flat for the year and up 13 from the october low an unimpressive showing that is either an uncommonly weak bull trend or a bear market on an atypically long pause but the megacap tech dominance this year is also merely a catchup move by the most wounded part of the market in the 2022 downturn here is the equalweighted s  p 500 vs the nasdaq 100 since the end of 2021 not exactly a picture of profound longrunning imbalance more like the ebb and flow of marketcap preferences the likes of microsoft  nvidia  meta platforms and alphabet have also had 2023 earnings forecasts revised up in recent months in contrast to most of the market restoring some of the predictablegrowth advantage they lost last year no doubt the ai theme is feeding a capex excitement and hype cycle that is at risk of overshooting if it hasnt already and apple with a market cap exceeding the entire russell 2000 is right up at multiyear price and valuation resistance still if the concern is that investors will look at the s  p 500 juiced by megatech and infer that the market is in great shape and the economy must be beyond reproach such worry is badly misplaced investors are not speaking feeling or acting as if the s  p 500 this year is compounding at a 24 annualized rate which it is they are uneasy and expecting trouble goldman sachs head of hedgefund coverage tony pasquariello on friday said the trading community remains very defensive in their risk taking based on futures positioning and longshort exposures adding that in a goldman client survey bearish sentiment is close to what we saw last summer which was the most bearish on record set against this tactical dynamic retail investors remain wellexposed to stocks though according to a weekly bank of america privateclient tally equity allocations continue to slide and are now at their lowest aggregate level since september 2020 this along with cyclicals languishing at far lower valuations and investors having marinated in recession anticipation for a year suggests if nothing else that high expectations are not among this markets big problems breaching the banks the bankstress story has gone from acute emergency to chronic malaise deposit flight has abated mostly but the stocks are bereft wouldbe buyers mistrustful of stated book values mindful of impaired earnings power and bracing for more regulation and credit stress the threemonth drop in the kbw bank index has reached 36 only twice in 30 years has it had it worse performance over such a span in the global financial crisis when the system nearly failed and in the flash covid crash in 2020 the group might be getting toward close your eyes and buy levels but absolute valuations arent broadly scraping bottom and sectors under this kind of liquidation with the market seemingly keen for a policy fix can overshoot along the way yet it must be worth something that this is all happening due to funding costs rising because consumers have good highyielding options not because of toxic credit conditions in fact the reason banks sit on unrealized losses on their loan portfolios is that something like 80 of homeowners with a mortgage are locked in below 5 apple last week just paid 485 for new 30year debt so its not bad for the typical household to be paying less than a doubleaplusrated 27 trillion marketcap company does this go to 11 with the posturing over the debtceiling and proposed spending cuts colliding with a twitchy stock market on alert for an economic downturn the shadow of 2011 is tough to escape the stock market has coincidentally or not carved a similar path so far this year as it did to begin 2011 the s  p 500 that year raced higher to print a 7 gain into a february high then chopped sideways on may 12 2001 the index was up 74 on the year at the close this friday may 12 the s  p was up 72 in 2011 it would keep chopping in that range for another two months before plunging in conjunction with standard  poors downgrading treasury debt even after a debtceiling compromise had been reached much else was happening from european sovereign debt melting down to fears of a recession relapse in the us yes thats right while 2011 in hindsight seems part of a steady slow recovery after 2009 at the time it was seen as at risk of another contraction headlines included on the verge of a doubledip recession new york times ten signs the doubledip recession has begun nbc news and forecast says doubledip recession is imminent cnn it wasnt yet fear of fiscal austerity colliding with cyclical weakness clearly drove a quick and queasy flush in stock prices in fact the lack of a more decisive cleansing flush in stocks last year is among the reasons so many observers are reluctant to believe the tapes state of suspended animation is a base for an eventual larger advance ive noted repeatedly that if last years gut check – a 27 peaktotrough s  p 500 loss taking it down toward merely average valuations – were all the pain investors had to endure then theyd have gotten off relatively easy the tradeoff for this is forward returns from that low didnt look terribly compelling which is perhaps why the recovery so far has been wan and why so many investment pros seem to want another chance to buy the s  p 500 at 3600 or lower to refresh those expectedreturn models sometimes the market bows to the desires of the crowd but not always and certainly not on command