Is the US stock market, which is singing all the way, quietly brewing risks behind the scenes?

Recently, the US stock market has exhibited some unprecedented trends, first with the Blue Chip Index, the Dow Jones Industrial Average, declining for the ninth consecutive trading day, marking the longest losing streak since 1978, with a total drop of about 3.5%.

Secondly, the S&P 500 Index has seen more declining stocks than advancing stocks for 12 consecutive days, which is the longest continuous data recorded since Bloomberg started tracking in October 1996, and it is also the second longest decline period in 100 years. The longest continuous decline since the 1920s was 14 days in 1978.

It is worth mentioning that the US stock market can be described as 'ice and fire.' This decline is accompanied by new highs in the S&P 500 and Nasdaq Composite Index, which just reached a historical high this Monday, while the S&P 500 Index is only about 0.27% away from its all-time high.

What are the reasons behind this divergent trend? Does it indicate that greater risks are brewing?

The market is turning towards Mag7.

Behind this divergent trend, the market is steadily shifting towards the 'Seven Giants' of the US stock market, Mag7.

Deutsche Bank Analyst Jim Reid noted in the latest report that this is due to the fact that Mag7 hit an all-time high last night, continuing an upward trend for 9 out of the past 12 days, and pushing its year-to-date increase to over 76%.

However, Deutsche Bank's 2025 investor survey reached a contradictory conclusion, with 33% expecting Mag7 to decline in 2025, and believing that the chances of the Index falling by half in the next year are nearly twice as high as the chances of it doubling.

Deutsche Bank indicates:

Another reason this historic concentration may become problematic is that the US stock market is in a super AI bubble or a historic market slump, with investors continually flocking to a few stocks, which inevitably leads to catastrophic outbreaks of accumulated market vulnerabilities.

Since the beginning of 2022, Mag7 has almost doubled, but the year 2022 itself had nearly halved, and since the end of 2022, it has almost quadrupled. Deutsche Bank concluded that perhaps the outlook for the USA is much higher than the seemingly overwhelming consensus view of the future.

Are larger risks brewing?

In addition, UnitedHealth Group is one of the important reasons for the recent decline in the Dow Jones Industrial Average. This insurance giant has seen a nearly 21% drop since the shooting incident, which began with the news of CEO Brian Thompson's tragic death.

Although UnitedHealth Group is the largest 'anchor' in the Dow, the decline is widespread, with over two-thirds of the stocks in the Dow Jones Industrial Average declining during this period.

Keith Lerner, co-chief investment officer and chief market strategist at Truist Advisory Services, stated that the way the Dow Jones is falling is somewhat strange. Funds continue to flow into technology stocks. This is the dominant theme of this market—AI and Technology. After the election, investors are focusing solely on the positive aspects of Trump's policies. Next year, they will have to pay attention to both the good and the bad, including concerns over Trump's threats to raise tariff rates and large-scale deportations.

Ameriprise's chief market strategist stated that the recent consecutive declines in the Dow Jones Index should not necessarily be seen as a sign of future problems. The recent decline represents some profit-taking following significant rises in the past weeks. Expectations surrounding the risks and opportunities presented by Trump's new administration taking office next year have also been moderately adjusted, including whether the Trump 2.0 policy agenda can stimulate stock price increases.

Editor/lambor