Two stock markets, two takes

SPEAKER_1 (0:01)

The systemic risk in the economy is affected both by levels of consumer debt and federal debt. They don't necessarily interact directly, but high levels of debt across the economy can create risks for stress in the financial system, perhaps ultimately instability in the financial system.

SPEAKER_2 (0:20)

To hear more about potential impacts of our increasing federal debt level, subscribe to P-Gym's The Outthinking Investor in your favorite podcast app.

Katie Martin (0:29)

Thank you for.

Ethan Wu (0:36)

Pushkin.

The S&P 500 just hit an all time high, while the UK's main stock index, the FTSE 100, named after the Financial Times, most certainly did not. Today on the show, two markets, two takes. This is Unhedged, the markets and finance show from the Financial Times and Pushkin. I'm reporter Ethan Wu here in the New York studio, joined from London by, I'm not gonna quite call you UK advocate, Katie Martin.

Katie Martin (1:03)

Hey, how are you doing, Ethan?

Ethan Wu (1:05)

Hey, I'm good, I'm good. I'm representing the US side of the show, and you're representing the UK side.

Katie Martin (1:09)

As always, you've got the whole bandana with a flag on it and everything.

Ethan Wu (1:14)

Well, Katie, it's totally unmissable that the S&P 500, after what feels like years of nonstop bad news, has crawled, kicking and screaming, to an all-time high.

And so we thought we'd talk about that on the show, but we wanted to, because we spent most of the last show talking about US stocks, we also wanted to put up a foil, the curious case of the FTSE, which we'll get to in a minute. But let's start with US stocks, Katie. It felt like this was the least jubilant all-time high that I've ever witnessed, but maybe I haven't witnessed enough.

Katie Martin (1:43)

Yeah, normally when, you know, S&P 500, like the big stocks index that everybody knows and loves, when that thing hits a record high, it's like, woohoo, get out the bunting, you know, slap on the kind of baseball caps and all the rest of it. And this time everyone's like, eh, yeah, okay, it's kind of limped over the line.

So the index had a good run on Friday that took it to an all time high at like 4,800 and a bit. It's up sort of 1.7% so far this year. And yeah, where's the joy? Where's the glee? Where are the parties in the streets?

Ethan Wu (2:20)

And I think one of the reasons for the lack of jubilance has been the Mag-7. They were the ones kind of dragging the index over the threshold to an all time high. You weren't seeing this kind of broad-based excitement about US stocks in general. And it gets to, as we talked about many times, the big valuation gap between where the Magnificent 7R, the very top of the market, is quite expensive and where the kind of meaty middle of the market is, which is average to maybe a tiny bit expensive, but not really that expensive.

And when you don't have this kind of broad-based rally inequities, it gives people nerves, which is a weird thing, again, to talk about when you're at an all time high. But that's sort of how it feels like to me, right? It's that people want to celebrate, but also they don't. And so you end up with this sort of ambivalence.

Katie Martin (3:06)

Yeah. So the equal weighted S&P 500 So rather than having an index that is weighted according to the market capitalization of the things inside it, which when it comes to the Mag 7 big tech stocks, they absolutely dominate this thing. If you just give each company in the S&P 500 an equal slice, then that thing, that index is down actually about 1% so far this year.

So what in fact you've got is like Meta, Microsoft, NVIDIA really doing the hard work so far this year. Amazon's doing okay among the other sort of Mag 7 stocks. Google's doing quite nicely. Apple has picked up. Tesla is a whole other story. And I suspect we're going to be talking about this in a separate podcast sometime soon, because they've got results out later this week, I believe. But there's just like three stocks that kind of matter at the moment, and that doesn't feel very satisfying. Now, if you take the 7, yeah, we talk a lot about Mag 7, and we talk a lot about how top heavy the market is. But sometimes when you see little kind of stats around this, it's just mind blowing. So if you put together the magnificent 7 stocks, those ones I just named, and squish them together, that's as much as the entire market capitalization of the stock markets in Canada, the UK and Japan put together.