It’s no secret that market leadership has become more concentrated over the years, but this is ridiculous. Bank of America strategists think one specific stock could hold the key to whether the tough August on Wall Street is just temporary, or if it’s the harbinger that the strong rally of 2023 is about to fade away. That one company is Microsoft , the behemoth with the $2.35 trillion market cap and, it seems, a position in the driver’s seat on where the market goes next. In his weekly breakdown of money flows through the financial markets, BofA investment strategist Michael Hartnett said Microsoft needs to reassert itself or face dragging down the rest of the stock market. “If ringleader can’t maintain new highs, equity and credit narrative could flip from ‘buy-the-dip’ in H1 to ‘sell-the-rip’ in H2,” Hartnett wrote. Microsoft has been slumping badly of late, down 8.3% over the past month and 1.9% in the last five trading days, through Thursday’s close. For the year to date, though, it has been a top performer, surging more than 32% and contributing about 37% of the Dow Jones Industrial Average ‘s point gain. MSFT YTD line Microsoft as market leader That’s why it holds such a pivotal position in determining how things go from here. Hartnett goes so far as to compare the stock to Yul Brynner in “The Magnificent Seven.” For those not up on their 1960’s cinema, Brynner played Chris Adams, leader of a band of gunfighters hired to protect a Mexican village from bandits. Considered a classic of the Western genre, the movie has a bittersweet ending. Harnett noted that the equity put/call ratio has hit its highest point since the collapse of Silicon Valley Bank in March, “a bad sign if stocks can’t hold hold here.” Microsoft’s swoon comes at a somewhat precarious time for the markets. Investors seem to be losing faith in the tech leadership, which includes Microsoft: Another $2 billion left the sector last week, the eighth straight week of outflows.
