I'm Dan Sheehan, a wealth advisor / financial planner based in Charlotte, NC. I work with high earners, families, and business owners on the things that actually move the needle over a lifetime: building the plan, managing the portfolio, and getting the tax picture right. Most of my clients came to me knowing they were doing well but suspecting they were leaving something on the table. Usually they were. This newsletter is where I share the thinking behind that work, one topic at a time.
Good morning investors,
The S&P finally broke out of its 7,700 range. Chips led a strong session Tuesday, pushing both the S&P and Nasdaq to record highs, with the S&P up 0.6% to close above 7,800 for the first time and the Nasdaq up 0.5% to 27,600. Oil and bond yields fell together, which gave stocks room to run. Marvell jumped nearly 6% on stronger guidance and AMD added almost 3% on the Citi target raise I mentioned yesterday.
Futures are lower this morning, with oil and yields both ticking back up ahead of a 10-year Treasury auction and the Fed minutes this afternoon. The 10-year sits near 5.31%, the 30-year above 5.68%. The minutes from September's meeting are the main event, offering a look at how the committee was thinking when it raised rates. Levi's and Applied Digital report, and the earnings calendar stays quiet until the banks kick off next week.
Three Stocks, a Fifth of the Market
The concentration at the top of the market has reached new heights. Nvidia, Apple, and Microsoft now make up more than 21% of the entire S&P 500, three companies carrying over a fifth of a 500 stock index. That makes the old concentration worries of 2023, when people fretted about the market's top heaviness, look mild, and it dwarfs the Exxon, IBM, and AT&T eras that once defined market dominance. Nvidia alone now accounts for 5.21% of the MSCI All Country World index, a bigger weight than Japan, the world's third largest stock market, and more than double the weight of Germany or France.
A few of these names are holding up the market's fortunes on their shoulders, and the mechanics behind it are the same as 2023, just more extreme. A wave of technological change is enriching a small group of companies that are propping up everything else. For an index investor, if you own the S&P, you've captured the gains from these giants without having to pick them but then on the other hand, you own far more concentration than you may realize, with a fifth of your supposedly diversified index riding on three stocks. That's the part I'd want clients to understand. A low cost index fund is still one of the best tools ever built for long term investors, and the logic Bogle and Buffett championed hasn't changed, but "diversified" doesn't mean what it did a decade ago when the index itself has become this concentrated, and knowing your true exposure matters more now than it has in years.
This is part of why the 60/40 portfolio is drawing interest again, especially for retirees. With bonds finally paying real yields and the equity side of the index carrying this much concentration risk, the appeal of a deliberate split between stocks and high quality bonds, rather than riding a top heavy index alone, has come back in a way it hadn't during the zero rate years. It's a reminder that diversification is a decision you make on purpose, not something an index automatically does for you.
Positioning Has Turned Sharply Against Small Caps
Something worth noting on the group I wrote about yesterday is that short interest in the Russell 2000 has climbed to 8% of shares outstanding, the highest since at least 2019 and nearly double where it sat at the start of 2025. Before the 2022 bear market it was around 3.5%. This follows the S&P outrunning the Russell by nearly 10 percentage points in the third quarter, the widest gap since early 2020.
Heavy short interest reflects real concern about rate sensitive small companies, which is the fundamental pressure I described yesterday. It also means a lot of investors are leaning the same way, and crowded trades can reverse hard when the backdrop shifts. If the rate outlook moves from "more hikes" toward "the Fed is done," a heavily shorted, already corrected group is the kind of setup where sentiment can turn quickly. That doesn't make it a call, and I wouldn't position on short interest alone. It adds to the picture of a group where expectations have gotten quite negative, which is often where the more interesting setups live.
SpaceX Reaches for $40 Billion to Buy Chips
The scale of AI infrastructure spending keeps reaching new extremes. SpaceX is reportedly in talks to raise around $40 billion in debt, roughly $10 billion in bank loans and $30 billion in investment-grade bonds, specifically to buy Nvidia chips, citing what Bloomberg described as insatiable demand from AI developers. A single company raising $40 billion in debt to buy chips from one supplier is the kind of number that captures where this cycle is.
This fits the physical layer theme I keep coming back to. The money keeps flowing toward whoever supplies the compute, and the demand is strong enough that buyers are taking on enormous debt to secure chips. The same point carries a caution worth holding. Financing this buildout increasingly through debt means more of the AI economy is being built on borrowed money, and that competes with the government for capital in a market where long yields are already at multi-decade highs. The demand is real and the infrastructure case stays strong. The amount of debt being issued to fund it is the part I watch, because it ties the whole AI trade more tightly to the bond market I keep flagging. On that note, Nvidia is closing in on a $6 trillion market cap, which tells you how much the market is rewarding the company at the center of all this spending.
Diesel Draws a Warning
A day after the administration moved to ease diesel costs with the red dyed fuel order, Chevron's CEO warned it would be unwise to go further with an actual diesel export ban, arguing it could make the supply situation worse by making allies question whether the US is a reliable supplier. His point is that cutting exports might lower domestic prices briefly but would damage America's standing as a dependable source and could backfire.
This matters for the inflation picture because diesel has been the stubborn part of the energy story, feeding into the cost of nearly everything through freight and farming. The administration is attacking it from several directions, the reserve releases, the tax deferral, and the dyed diesel allowance, while facing pushback on the most aggressive option. Anything that eases the refined product squeeze helps the case that inflation can cool without a slowdown, and a cooler inflation path is what would let the Fed treat September's hike as the end rather than the start of a cycle.
What I'm Watching
The Fed minutes this afternoon for how divided the committee was on September's hike and any hint on where they go next. The 10-year auction today, since weak foreign demand for US debt is part of what's kept yields climbing, and the auction is a direct read on appetite. CPI on October 14 as the real swing factor for the next decision. And diesel, where the tug of war between easing measures and an export ban will shape the most stubborn corner of inflation.
Best regards,
Dan Sheehan [email protected]
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Market Pulse with Dan Sheehan is a personal market commentary newsletter and is independent from my employer. The content is provided for informational and educational purposes only and reflects my views as of the publication date, which may change without notice. Nothing contained herein should be construed as personalized investment, legal, tax, or financial advice, or as a recommendation to buy or sell any security. Any positions discussed represent my own views and may not be suitable for every reader's objectives, financial situation, or risk tolerance. Information is derived from publicly available sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Readers should conduct their own research and consult their own professional advisers before making financial decisions.