While indexes have rallied this year, some investors believe the rebound is thanks to only a small handful of star stocks, which could prove troublesome in the near future, contends an article in The Wall Street Journal. Major indexes like the S&P 500, as well as those in Europe, have risen at least 10% this year from an October low, overcoming hurdles such as the banking crisis in March, the recent debt-ceiling showdown in Congress, and recession fears. But the number of stocks participating in the rally has shrunk, and that could indicate the market isn’t as healthy as it appears.

U.S. tech stocks dominated the markets for the last decade, and that dominance has only grown this year, as eight of the U.S.’s biggest tech and growth companies make up 30% of the S&P 500’s market capitalization. Meanwhile, the number of S&P 500 stocks that closed above 200-day moving averages dropped to 38% recently—another red flag that market breadth is narrowing. Markets are usually healthier when more stocks are going up at the same time, and traditionally rallies that occur across a broad swath of the market are more sustainable. On the flip side, rallies that are more limited in scope could herald a downturn. And that narrowing breadth could be making investors nervous, some strategists believe. Managers are selling off more and more stocks in companies from sectors more sensitive to the economy, and investors are stampeding into mega cap tech stocks like Nvidia, fueled by the frenzy around AI. The dominance of a few chosen star tech stocks could open the market up to the possibility of a swift undoing if the tech sector suddenly goes sideways, as it did in September 2020, when tech shares dragged the S&P 500 down 10% in 3 weeks, the article maintains.

But narrower breadth doesn’t always herald the end of a rally, and in recent days there have been more gains across a broader swath of the market, in the energy, financial, and industrial sectors. The Russell 2000 index, which tracks small-cap stocks, also rose 2.7%. The fear with a narrow rally, says Altaf Kassam of State Street Global Advisors, “is that when it turns, it turns very violently.”

Meanwhile, in Europe, nearly half of the stocks in the Stoxx Europe 600 closed over 50-day moving averages. Across the pond, it’s luxury brands such as LVMH Moet Hennessy Louis Vuitton (up 19% this year) and Hermes (up 33%) that are driving the markets, rather than tech, the article reports.