The Most Concentrated S&P 500 of All Time Faces Some "Bad Breadth" Challenges

Time for a hedged barbell strategy: long equal-weight S&P 500 and short the cap-weight index.

Key Takeaways

• Priced for Nirvana: At some point, things end up getting stupidly priced. Like a -25-basis point Equity Risk Premium (comparing the real yield on the CAPE to the 30-year TIPS yield). The CAPE multiple has expanded to 41.0 from 40.2 in May and 38.0 in April, and is at its highest level since September 2000! Investment-grade corporate bond spreads have tightened to below 80 basis points and are now tighter than at any point since the summer of 1998, just prior to the Russian collapse. Look ma’, no risk!