Nomura: "70% of US Market Gains Driven by Just 10 Stocks"... Diesel Shortages Pose New Shock Trigger

85% of S&P 500 constituents have fallen more than 10% from their peaks · Index gains concentrated in mega-cap AI stocks · European energy supply shortages stimulate inflation and interest rate volatility
While major US stock indices show relatively stable trends, warnings have emerged that broad corrections are already underway in individual stocks.
Charlie McEligit, a cross-asset strategist at Nomura Securities, analyzed in an October 8 report that while a small number of large-cap AI-related stocks have supported the S&P 500's rise, a significant number of stocks have fallen sharply.
The problem is that a market with such concentrated gains may become more vulnerable to energy prices and interest rate volatility.
1. 70% of S&P 500 gains generated by just 10 stocks
According to Nomura's analysis, the S&P 500 has risen approximately 23% since March 30, but about 70% of those gains came from the top 10 stocks.
Nvidia alone contributed about 13% of the total gains, while Micron, Apple, and Microsoft each accounted for approximately 9%.
Differences are also evident in performance since August 3.
Category / Return Rate
Magnificent 7 / +7.7%
S&P 500 Market Cap Weighted Index / +2.6%
S&P 500 Equal Weighted Index / -3.0%
This means that while some large-cap tech stocks rose, the average trend for the remaining stocks actually weakened.
2. 85% of constituents have fallen more than 10% from their peaks
Looking only at the index, it may seem like there hasn't been a major correction, but the decline in individual stocks is significant.
S&P 500 Constituent Drawdown from Peak / Percentage of Stocks
Exceeding 10% / 85%
Exceeding 20% / 59%
Exceeding 30% / 41%
Exceeding 40% / 26%
Exceeding 50% / 17%
These are statistics regarding the maximum drawdown from the peak for each stock up to the time of the survey. This does not mean all stocks fell by these amounts within the last two months.
Nomura interprets this phenomenon as a market where stocks and sectors take turns undergoing severe corrections.
They explained that sectors sensitive to rising interest rates, such as real estate, finance, and industrials, have already been under pressure; therefore, it is difficult to conclude that interest rate risks have not been reflected in the stock market simply because the index remains robust.
3. Low volatility does not mean the market is safe.
Over the past month, the movement of the S&P 500 index itself was limited to about 0.8%, but the average volatility of individual constituents reached 8.9%.
Even if significant changes are occurring within the market, the index as a whole can appear stable as rising and falling stocks offset each other.
Additionally, ultra-short-term option trading and volatility selling strategies are acting as factors that suppress index movement.
Nomura pointed out that while investor demand for downside protection is particularly low, concerns about missing out on the rally of AI leaders are growing.
In such a structure, index volatility may remain low during normal times, but if an unexpected shock occurs, there is a possibility that investment position adjustments could happen simultaneously.
However, the fact that extremely low correlation between stocks has been observed in the past, such as just before the 2007 financial crisis or during the 2018 volatility spike, does not necessarily mean a new crisis is imminent.
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4. Why would a diesel shortage threaten the US stock market?
A noteworthy part of this report is the content regarding the diesel supply shortage in Europe.
The analysis suggests that not only crude oil prices but also diesel supply disruptions caused by a lack of refining facilities could affect the entire financial market.
The path of the shock is as follows:
Diesel supply shortage → Rising transportation/industrial costs → Increased inflation pressure → Rising interest rates and increased volatility → Pressure on stock market valuations
If diesel prices rise, logistics and industrial production costs increase, which can influence inflation expectations and central bank interest rate policies.
In particular, Nomura is paying attention to the phenomenon where European diesel refining margins and interest rate volatility move together.
Even if Middle East tensions ease and international oil prices fall, the diesel supply burden could persist if the structural problem of insufficient refining facilities is not resolved.
Therefore, it is difficult to fully grasp actual energy supply pressure and interest rate risks by only checking international oil prices.
5. AI earnings and interest rates: Two variables to determine market direction
Nomura presented three main future market paths:
First, a bullish scenario where AI earnings meet expectations.
If the earnings of large tech companies appear strong again, follow-on buying from investors may flow in. The S&P 500 level of 8,000 mentioned in the report is a scenario reflecting this upward potential, not a fixed forecast.
Second, a scenario where Middle East tensions ease and energy prices fall.
If inflation and interest rate burdens decrease, the rally could spread to mid-and small-cap stocks that have been underperforming.
Third, a risk scenario where interest rate volatility increases again.
Even if AI companies' earnings are good, if energy supply issues or inflation pressures persist, long-term interest rates and interest rate volatility could rise again.
Nomura also suggested hedging volatility through interest rate options as a means to respond to these risks.
Conclusion: Look at the cracks within the market rather than the index.
The core of this report is not a prophecy that the US stock market will crash immediately.
Rather, it is a warning that while a few AI mega-caps are propping up the index, the majority of stocks have already experienced significant corrections, and low market volatility may be masking this vulnerability.
Moving forward, it is necessary to monitor three things together:
Whether the actual revenue and investment profitability of AI companies meet expectations.
Whether the upward trend spreads from a few large-cap stocks to mid-and small-caps and other sectors.
Whether diesel prices, long-term interest rates, and interest rate volatility rise again.
If the strength of a few leading stocks is maintained, the index rise can continue. Conversely, if AI growth expectations waver or an energy-driven inflation shock occurs, there is a risk that the vulnerabilities hidden by the index until now could be revealed all at once.