A well-liked name on Wall Road to start out 2024 was for a broadening of the inventory market rally.However, largely, that hasn’t occurred this yr, with Nvidia (NVDA) alone representing about one-third of the S&P 500’s good points this yr.Whereas some have just lately highlighted {that a} optimistic pattern in earnings to finish 2024 may nonetheless help a broadening, Morgan Stanley’s chief funding officer Mike Wilson wrote in a be aware on Sunday that the draw back surprises in financial knowledge put a cap on any broadening to come back. Wilson highlighted Citi’s Financial Shock Index, which measures the extent to which knowledge has are available in higher than forecast.The index has been monitoring decrease for a lot of 2024 and simply hit its lowest degree in additional than a yr, dispelling a standard narrative a couple of stronger-than-expected financial system supporting different areas of the market outdoors of large-cap firms.”With macro knowledge broadly coming in softer [year-to-date], many decrease high quality and economically delicate areas of the market have lagged, whereas a slender checklist of upper high quality mega caps have carried efficiency.” Wilson mentioned. “In our view, this can be a signal the market is turning into extra centered on development softening and fewer centered on inflation and charges.”So traders have piled into firms which have thrived regardless of excessive rates of interest and slowing financial development. Wilson famous that this extends past a number of giant tech names to different shares like Eli Lilly (LLY), Chipotle (CMG), and Costco (COST), which have all handily outperformed the S&P 500 this yr. However, it probably will not prolong to small-cap shares at this level, Wilson mentioned.Importantly, Wilson added that this surroundings can persist with out the broader market heading decrease.”Curiously, slender breadth doesn’t essentially imply weak returns trying ahead,” Wilson wrote. “The typical cap-weighted index return 6 months after slender breadth readings is 4%.”