August 2025 Market Commentary: The Haves and Have-Nots
by Jonathan McAdams, CFA
The Gilded Age, a period in the United States from roughly the 1870s through the early 1900s, was an economic and market environment in the United States marked by industrial expansion, technological innovation, and extreme wealth inequality. During this period, a small handful of elite companies amassed vast fortunes through railroads, steel, and finance – and the excesses of the Vanderbilts, Morgans, and Rockefellers and the ilk are legendary. While no two periods are ever exactly the same, today we find echoes of the Gilded Age’s “have and have nots” playing out in real time across equity markets, driven by technological disruption and investor concentration.
To help illustrate, despite the S&P 500’s high single digit year to date return, the median, or “average” stock, remains 12% below the 52-week highs hit earlier this year. We have seen a very wide dispersion in returns among sectors to date. 9 of 11 sectors are showing elevated divergence, which lands in the top 82nd percentile over the past 30 years. The percentage of stocks outperforming the S&P 500 is below 30%, the lowest in 25 years. Translation: it is not a rising tide lifting all boats – it is a selective surge.
And it is not just performance that has been lopsided, valuation spreads between stocks are equally extreme. The spread between the highest price-to-earnings ratio (P/E) stocks and the lowest is at some of the widest in the past 50 years.
When looking at the distribution of valuations today relative to where they were in the 1999-2000 tech bubble, we see a much higher concentration of stocks reside in the “high P/E” category compared to the tech bubble. Even though valuations were very stretched back in the late 90s, one could still find higher numbers of “cheaper” stocks than today.
Taken together, the stocks that are performing well in this market are 1. in fewer numbers than they have been historically, and 2. concentrated in a small group of exceedingly high P/E stocks. While valuations don’t reliably predict short-term returns, they do suggest asymmetric risk: limited upside for the premium stocks, and potential snapback for the laggards if the momentum shifts.
One of the most striking examples of the “have-nots” in this market is healthcare. Despite its defensive characteristics and long-term growth potential, the sector has been largely ignored by investors in the past few years. While there are well-known political and economic headwinds for healthcare, this underperformance comes even as companies continue to innovate and maintain solid balance sheets.
Investor preference for all things technology has left healthcare trading at a significant discount to historical norms – ranking in the bottom decile relative to the past 30 years. What can turn this tide is yet to be seen, but we would note that famed value investor Warren Buffett recently took a large stake in beleaguered healthcare company, United Health Group (UNH).
It probably goes without saying, but at the heart of this market bifurcation is artificial intelligence. Spending on AI infrastructure and capabilities is not only dominating market returns; it is reshaping corporate capital allocation and macroeconomic expectations. The Magnificent 7 (mega-cap tech firms with deep AI exposure) posted 26% year-over-year EPS growth in Q2, compared to just 7% for the rest of the S&P 500.
Source: JP Morgan Asset Management
Their 2026 capex (capital expenditures) estimates have surged by 29%, now totaling $461 billion, a figure that rivals the GDP of entire nations. This AI-driven investment cycle is creating a feedback loop: higher earnings, stronger guidance, and elevated valuations. Investors have responded by concentrating capital in these names, pushing their valuations and market caps to historic levels. The top ten companies now account for over 40% of S&P 500 earnings, underscoring the narrow range of leadership.
We are witnessing a market defined not by broad-based optimism, but by selective conviction. The “haves” – AI leaders and quality giants – continue to dominate. While we would agree that AI is creating tremendous changes and opportunities that should, and will be, capitalized on, we also remain focused on balancing that opportunity with discipline. The lessons of the Gilded Age remind us that such concentration and dominance rarely persist indefinitely. A portfolio built on balance, diversification, and at times “hunting where others are not” are crucial to long-term success and durability.
August 2025 Market Commentary: The Haves and Have-Nots
by Jonathan McAdams, CFA
The Gilded Age, a period in the United States from roughly the 1870s through the early 1900s, was an economic and market environment in the United States marked by industrial expansion, technological innovation, and extreme wealth inequality. During this period, a small handful of elite companies amassed vast fortunes through railroads, steel, and finance – and the excesses of the Vanderbilts, Morgans, and Rockefellers and the ilk are legendary. While no two periods are ever exactly the same, today we find echoes of the Gilded Age’s “have and have nots” playing out in real time across equity markets, driven by technological disruption and investor concentration.
To help illustrate, despite the S&P 500’s high single digit year to date return, the median, or “average” stock, remains 12% below the 52-week highs hit earlier this year. We have seen a very wide dispersion in returns among sectors to date. 9 of 11 sectors are showing elevated divergence, which lands in the top 82nd percentile over the past 30 years. The percentage of stocks outperforming the S&P 500 is below 30%, the lowest in 25 years. Translation: it is not a rising tide lifting all boats – it is a selective surge.
And it is not just performance that has been lopsided, valuation spreads between stocks are equally extreme. The spread between the highest price-to-earnings ratio (P/E) stocks and the lowest is at some of the widest in the past 50 years.
When looking at the distribution of valuations today relative to where they were in the 1999-2000 tech bubble, we see a much higher concentration of stocks reside in the “high P/E” category compared to the tech bubble. Even though valuations were very stretched back in the late 90s, one could still find higher numbers of “cheaper” stocks than today.
Taken together, the stocks that are performing well in this market are 1. in fewer numbers than they have been historically, and 2. concentrated in a small group of exceedingly high P/E stocks. While valuations don’t reliably predict short-term returns, they do suggest asymmetric risk: limited upside for the premium stocks, and potential snapback for the laggards if the momentum shifts.
One of the most striking examples of the “have-nots” in this market is healthcare. Despite its defensive characteristics and long-term growth potential, the sector has been largely ignored by investors in the past few years. While there are well-known political and economic headwinds for healthcare, this underperformance comes even as companies continue to innovate and maintain solid balance sheets.
Investor preference for all things technology has left healthcare trading at a significant discount to historical norms – ranking in the bottom decile relative to the past 30 years. What can turn this tide is yet to be seen, but we would note that famed value investor Warren Buffett recently took a large stake in beleaguered healthcare company, United Health Group (UNH).
It probably goes without saying, but at the heart of this market bifurcation is artificial intelligence. Spending on AI infrastructure and capabilities is not only dominating market returns; it is reshaping corporate capital allocation and macroeconomic expectations. The Magnificent 7 (mega-cap tech firms with deep AI exposure) posted 26% year-over-year EPS growth in Q2, compared to just 7% for the rest of the S&P 500.
Their 2026 capex (capital expenditures) estimates have surged by 29%, now totaling $461 billion, a figure that rivals the GDP of entire nations. This AI-driven investment cycle is creating a feedback loop: higher earnings, stronger guidance, and elevated valuations. Investors have responded by concentrating capital in these names, pushing their valuations and market caps to historic levels. The top ten companies now account for over 40% of S&P 500 earnings, underscoring the narrow range of leadership.
We are witnessing a market defined not by broad-based optimism, but by selective conviction. The “haves” – AI leaders and quality giants – continue to dominate. While we would agree that AI is creating tremendous changes and opportunities that should, and will be, capitalized on, we also remain focused on balancing that opportunity with discipline. The lessons of the Gilded Age remind us that such concentration and dominance rarely persist indefinitely. A portfolio built on balance, diversification, and at times “hunting where others are not” are crucial to long-term success and durability.
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