Weekly Newsletter 11/10/2025
- mribbeck
- 16 hours ago
- 7 min read
A Market Carried by Seven Stocks - And Why the Next Cycle Will Look Different
The U.S. equity market delivered powerful returns over the last decade — but the source of those returns tells the real story. Updated Bloomberg attribution data confirms that performance was not broadly shared. Instead, it was one of the most concentrated bull markets in modern financial history.
Understanding this dynamic is essential for understanding what comes next.
1. Market Performance Over the Last 10 Years
(Cumulative Total Return 11/30/2015 – 10/31/2025)
Magnificent 7 (BM7 Index): +2,401.65%
S&P 500 (SPY): +287.09%
S&P 500 ex–Mag 7: +194.48%
S&P High Dividend Index: +128.62%
S&P Midcap 400: +159.21%
S&P Small Cap 600: +155.30%
MAG7 didn’t simply outperform — they separated entirely, creating a vertical return profile. The rest of the market posted respectable long-term gains, but nothing remotely comparable.
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2. Contribution to Return: Who Actually Drove the S&P 500?
The Bloomberg CTR numbers quantify how much each part of the index actually contributed to SPY’s +287.09% return.
Contribution as % of SPY’s 10-Year Return
MAG7: 113.22 → ~40% of ALL return
Top 10: 132.51 → ~46%
Top 25: 167.33 → ~58%
Remaining 475 stocks: ~42% combined
This means:
Seven stocks generated ~40% of all market gains.
Ten stocks generated nearly half.
Twenty-five stocks generated well over half.
The other 475 companies contributed positively, but their combined impact was modest relative to the surge in mega-cap technology and AI leadership.
This was not a broad bull market. It was the narrowest leadership regime in decades. Yet, the fundamentals behind the market are far more balanced as of late.
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3. Q3 Corporate Earnings: Broad Strength Beneath Narrow Price Leadership
Despite the top-heavy return structure, the current underlying earnings environment is far broader and far healthier than the BM7-dominated performance would imply.
FactSet’s latest Earnings Insight highlights impressive fundamental breadth:
82% of companies beat EPS estimates
77% beat revenue estimates
Earnings: +13.1% YoY — fourth straight quarter of double-digit growth
Revenue: +8.3% YoY — strongest since 2022
Net margins: improved to 13.1% YoY
And critically:
All 11 sectors posted YoY revenue growth
Eight sectors posted YoY earnings growth
So while market returns were concentrated in a handful of names, the actual economy and corporate profitability remain broad, resilient, and healthy.
This divergence — narrow price leadership, broad earnings support — is one of the most important signals for the next market cycle.
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4. Labor Market & Consumer Trends: Cracks, Not Collapse
The labor market remains strong overall, but the stress is showing up at the lower end of the consumer base. Layoffs have begun rising from extremely low levels, and credit conditions are tightening.
October layoffs: 153,074 (+175% YoY)
YTD job cuts: 1.09M (+65% YoY)
Auto loan delinquencies: rising YoY, especially subprime
The consumer economy is bifurcated:
Areas of Strain
Lower-income households
Subprime borrowers
Discretionary spending under pressure
Areas of Strength
Higher-income households
Wage growth outpacing inflation
Healthy savings and asset appreciation
The picture is clear:
We are seeing significant pressure points, but not signs of a systemic downturn (yet).
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5. Valuations: Mega-Cap Stretch vs. Value/Dividend Discount
Updated valuation data reveals a historic dispersion:
BM7 Index TTM P/E: 38.72
S&P 500 Index TTM P/E: 25.17
S&P High Dividend Index TTM P/E: 14.43
This means:
BM7 trade at 60%+ higher valuations than the S&P 500
and nearly 3× the valuations of dividend/value stocks
This is one of the widest valuation spreads in over two decades.
Outside the BM7:
valuations compress sharply,
many sectors trade near historical norms,
income/value factors are meaningfully cheap.
The takeaway is unmistakable: The biggest valuation risk is concentrated at the very top of the index — not across the market. Meanwhile, the valuation opportunity is concentrated in dividend/value stocks.
This sets the stage for potential leadership rotation.
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6. The Big Picture: A Market Poised for Rotation
When you combine:
extreme concentration of returns,
broad, resilient earnings,
consumer bifurcation but not collapse,
and historic valuation dispersion…
…it becomes clear the next decade will not look like the last.
The mega-cap era may not be “over,” but the probability of broader market participation — and valuation-driven leadership — is rising significantly.
The setup favors:
quality
dividends
value
SMID-cap equities
systematic factor approaches
risk-managed strategies
This is an environment where diversified, disciplined processes have a strong relative advantage.
Source: Bloomberg
Power Factor Strategy Update (Net of Fees, Through 11/12/25)
WBI’s Power Factor SMA series brings a disciplined, technology-driven approach to separately managed equity strategies.
Portfolio | YTD | Underlying Yield | P/E Ratio |
Growth & Quality | 13.68% | 0.95% | 28.61 |
All Cap Rising Dividends | 22.25% | 1.46% | 20.11 |
All Cap High Dividends | 5.90% | 4.44% | 9.71 |
SMID Rising Dividends | 11.65% | 1.65% | 15.12 |
Growth & Momentum | 16.39% | 0.79% | 29.91 |
AI Strategy | 8.07% | 0.19% | 102.83 |
Source: WBI. Power Factor AI Strategy Inception 09/24/2025
🔁 Weekly Trend Switch Research Report
Date: November 10, 2025
Summary of Model Updates
Equity Model: Low Risk, “Null” Ambient Risk Condition
Bond Model: Long Duration Investment Grade
Equity Model Analysis
The Trend Switch Equity Model remained in a Low Risk position this week and, keeping in line with last week’s prediction, forecasted stable conditions for equity markets. The Ambient Risk Condition stayed Null, with no prevailing trend toward Bullish or Bearish signals.
Key Observations:
Weekly Return Prediction: Was almost unchanged at 0.3%. Consequently, the prediction still pointed to a Low Risk stance.
Fed Funds Rate Influence: Our Fed Funds Rate Sub-Model switched to a Bearish state. This week, no combination of sub-models provided support for that stance, thus keeping the overall Ambient Risk Condition to Null.
Model Drivers: Technical, momentum, and economic factors were the primary drivers this week. Valuation, sentiment, and monetary factors also contributed, though with much lower relative impact.
Bond Model Analysis
The Trend Switch Bond Model signal continued pointing to Long Duration Investment Grade Bonds, supported by positive credit momentum.
Key Observations:
Credit Momentum: Stayed positive.
Credit Probability Shifts:
High Yield Probability: Dropped slightly from 35.0% to 34.2%.
Investment Grade Probability: Fell from 36.0% to 29.6%.
Treasury Probability: Was highest this week, rising further from 29.0% to 36.2%.
Duration Signals: Duration Probability and Duration Momentum both pointed to Long Duration. Thus, the overall duration recommendation was still Long Duration.
Outlook & Implications
This week, equity model probabilities returned to pointing to relative stability for equity markets, despite the ambient risk condition changing to Null. As a result, our model is maintaining its low-risk signal, mainly driven by technical and momentum market data. In the bond market, the model recommendation remained Long Duration Investment Grade Bonds, but credit probability levels make it very likely that the model will shift in the near future.
Stay tuned for next week’s updates, as we track these evolving conditions across equity and bond markets.
Source: WBI
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DISCLOSURE
Past performance is not indicative of future results. This is not an offer to buy or sell any security. No security, including those referred to directly or indirectly, is suitable for all accounts or profitable all the time. This information is compiled from sources believed to be reliable, but accuracy cannot be guaranteed. You should not assume that any discussion or information provided here serves as a substitute for personalized investment advice from WBI or any other investment professional. If you have any questions regarding the applicability of specific issues discussed to your individual situation, please consult with WBI or your chosen investment advisor. Additional information about WBI’s advisory operations, services, conflicts of interest and fees are in the Form ADV, which is available upon request or on the SEC’s website at http://www.adviserinfo.sec.gov. WBI is a registered investment adviser. Registration of an Investment Adviser does not imply any level of skill or training.
Net of Fee Performance is net of WBI’s maximum investment management fees. This model fee approach consists of netting down 100 bps from gross returns on a monthly basis. The actual, annual investment fee rate charges shall vary typically between 75 bps and 100 bps, but not more than 100 bps) depending upon market value of assets under management and the specific type of investment services to be rendered.
Other strategies may have different results.
References to other securities is not an offer to buy or sell.
S&P 500 Index is a market-capitalization-weighted index of 500 of the largest publicly traded companies in the U.S., representing approximately 80% of the total U.S. equity market capitalization.
NASDAQ Composite Index is a broad index that includes more than 3,000 common equities listed on the NASDAQ Stock Market, heavily weighted toward technology and growth-oriented stocks.
Dow Jones Industrial Average is a price-weighted index of 30 large, blue-chip U.S. companies across various industries and is one of the oldest and most widely followed equity benchmarks.
Russell 2000 Index tracks the performance of approximately 2,000 small-cap companies in the U.S., serving as a key gauge of the domestic small-cap equity market.
Bloomberg Magnificent 7 Index is an equal‐dollar weighted equity benchmark consisting of a fixed basket of 7 companies classified in the United States and representing the Communications, Consumer Discretionary and Technology sectors.
S&P 500 High Dividend Index serves as a benchmark for income seeking equity investors. The index is designed to measure the performance of 80 high yield companies within the S&P 500® Index.”
S&P MidCap 400 is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.
S&P SmallCap 600 seeks to measure the small-cap segment of the U.S. equity market. The index is designed to track companies that meet specific inclusion criteria to ensure that they are liquid and financially viable.
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