By Eric Parnell, CFA on May 28, 2026May 28, 2026 “It’s gettin’, it’s gettin’, it’s gettin’ kinda heavy” – The Power, Snap, 1990 The U.S. stock market is getting way ahead of itself. For as constructive on the markets as I was back in February and March when the S&P 500 was careening into correction territory despite the fact that economic growth remained strong and corporate profit growth projections were being revised higher, I am becoming increasingly dubious about the path forward from here following what has been a furious and relentless rally in the past two months since the late March lows. It would not be shocking to see the S&P 500 surpass 8000, but maybe reasonably sometime in the first half of 2027 if all goes well, not by the end of this June as is being implied by the current pace of the market. Way too far, way too fast. So what in particular is bugging this Chief Market Strategist of Great Valley Advisor Group that had been up until recently decidedly bullish on the U.S. stock market outlook? After all, the latest projections for U.S. economic growth are well north of +4% according to the latest Atlanta Fed GDPNow forecast, and corporate earnings growth projections keep getting revised higher into the high teens on a year-over-year basis. What more could you want? First, we’ve suddenly reverted back to the same highly concentrated markets that have defined the last couple of years. For example, only 38% of stocks in the S&P 500 are outperforming the benchmark index in 2026. This is down from over 60% just a few months ago. Why does this concentration matter today? After all, it worked out just fine in 2024 and 2025? Because the percentage of stocks within the currently skyrocketing S&P 500 continues to fade from as much as 75% before the outbreak of the Iran conflict to recent peaks near 57% today. In short, fewer and fewer stocks are being relied upon to surge the market higher. Why does this matter? Because if this shrinking group of market leaders falters, there are fewer stocks to pick up the slack. But wait a minute. You’ve said in the past that a growing number of stocks being left out of the rally was actually a glass-half-full good thing, as it meant there was more room to the upside for those being left behind to catch up to the upside. Indeed. But this premise relied not only on the strong economic and corporate earnings backdrop but also the idea that the already overflowing liquidity in capital markets was going to be further supplemented by additional interest rate cuts from the U.S. Federal Reserve. This was a true expectation for financial markets in 2024 and 2025 regardless of whether I agreed with the notion that the Fed should be cutting rates (I did not). But in 2026 with oil prices surging over $100 per barrel and inflation pressures starting to accumulate as the year progresses, expectations have now turned to the U.S. Federal Reserve potentially raising interest rates by a few quarter point hikes over the next year. This is liquidity coming out of the market on net, which historically has been a crack of the whip snap attack against stock prices. Another thing that’s bugging me even more is the extraordinary froth that has suddenly descended onto the semiconductor industry within the technology sector of the stock market. Check it. Don’t get me wrong, I totally get the narrative. AI is going to change the world, and we need boundless semiconductors of all shapes and sizes to power the compute infrastructure to make it all happen. Bang the bass turn up the treble. But here’s the thing. I remember hearing the exact same stories three decades ago when the Internet was changing the world. Did it deliver? Absolutely. But it didn’t mean that stock prices continued to the moon (more on this topic literally in a few weeks – teaser alert) for the indefinite future. And if any sustained stumble, economic or otherwise (liquidity drain) afflicts the markets, investors must be ready for the market wielding the other side of the risk sword. Here is the thing to remember about semiconductor stocks amid the relentless awesomeness. They are notoriously volatile and can be just as unforgiving on the downside as they are rewarding on the upside. They trade with a price volatility that is more than double that of the S&P 500 Index, and they have experienced ten distinctly different extended bouts of falling by as much as -40% to -70% or more over the past three and half decades. Bottom line. While these chip stocks may continue to run to the upside, it cannot be ignored that the semiconductor industry as a whole has rallied more than +80% in the last two months. I’m not one to throw the “bubble” term around often, but that’s some bubbly kinda stuff right there. And with a rising 10-Year U.S. Treasury yield (until the last couple of days) and the cryptocurrency implied price of stocks signaling a mean reverting -20% correction in tech stocks could take place at any time, it is important if nothing else to be careful out there in capital markets as we head into the summer months following what has been a tremendous but concentrated stock rally. Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Investment advice offered through Great Valley Advisor Group (GVA), a Registered Investment Advisor. I am solely an investment advisor representative of Great Valley Advisor Group, and not affiliated with LPL Financial. Any opinions or views expressed by me are not those of LPL Financial. This is not intended to be used as tax or legal advice. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Please consult a tax or legal professional for specific information and advice. LPL Compliance Tracking #1115507. Eric Parnell, CFA Chief Market Strategist Eric Parnell is the Chief Market Strategist for Great Valley Advisor Group. Eric applies his expertise in finance and economics to manage multi-asset portfolios, mitigate risk, deliver advice that promotes informed decision-making, and facilitate investors achieving their short-and long-term investment goals. He leads the GVA Asset Management platform overseeing the management of asset allocation models for GVA advisors and their end clients. 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