Written by Sendero’s Research Team
Poise at the Peak
What a Game 7 in Oklahoma City may illustrate about a market making new highs
Some nights sport hands you a metaphor too clean to ignore. Saturday was one of those nights.
The San Antonio Spurs walked into Oklahoma City for Game 7 of the Western Conference Finals, beat the defending champions in their own building 111-103, and earned the franchise’s first NBA Finals trip since 2014. Wembanyama took home Conference Finals MVP, and the Spurs open the NBA Finals against the New York Knicks on Wednesday. For those with a long memory, San Antonio’s first title came in 1999. Against the Knicks. Hold that year; we will need it shortly.
The win, and the potential lesson hiding in the box score
San Antonio led most of the night, but the score alone does not capture the full story. Oklahoma City clawed back and twice took the lead, and each time the Spurs answered—they had answers from everywhere: seven players scored in double figures, Julian Champagnie made six three-pointers and a total of 20 points, and Stephon Castle added 16 points, 6 rebounds, and 6 assists. The play people will remember was not a dunk. A pivotal moment came late when, with Wembanyama on the bench in foul trouble and the lead down to a sliver, the Spurs’ reserve big man Luke Kornet ran down a fast break and pinned the layup off the glass. Six minutes of court time, one play, season saved. The stars typically get the headlines, but the win often gets built by the names nobody circled before tip-off. Hold onto that idea, because it travels.
Now consider the market backdrop. U.S. equities are at or near all-time highs, the S&P 500 has strung together one of its longest winning streaks in years, and the index spent May near 7,500. It sounds like a beautiful box score. But read it like a Game 7 rather than a final score. Market leadership has been concentrated in a relatively small group of mega-cap technology companies. The Magnificent Seven now make up roughly 35 percent of the entire S&P 500, up from about 12.5 percent a decade ago. At points this year, the index has behaved less like 500 companies and more like a few dozen. That does not mean the rally is unsound, but it does mean investors should pay attention to concentration risk, valuation, and the degree to which performance is being driven by a narrower set of holdings than the headline index level may suggest. It is similar to when the score says you are winning, but only two players are scoring. At times, that can work, but what happens on the night the stars pick up their fifth foul?
Why 1999 keeps coming up
It is a happy coincidence that the Spurs’ first title year is also a useful historical rhyme for what is currently happening in the market. Then, as now, a transformational technology narrative encouraged investors to assign significant value to a small number of perceived leaders. In 1999, the internet, convinced the market to assign considerable value to a small number of companies. The thesis was not wrong; the internet did have a large impact. What became dangerous was the price paid for these companies and how few names carried the index. Today the technology is artificial intelligence, and we believe that, in this instance, the rhyme breaks in our favor: many of today’s AI leaders are established companies with substantial revenue and profitability, which differs meaningfully from portions of the late-1990s market. That difference matters and the parallel should not be overstated. But the structure rhymes loudly: enormous expectations concentrated in a few leaders, everyone else along for the ride. By mid-June, SpaceX is expected to debut on the Nasdaq, with a roadshow in early June and pricing expected around June 12 at a valuation estimated to be in the trillions. At those levels, it would be among the largest offerings in history. Anticipated IPOs for OpenAI and Anthropic are reportedly soon to follow. A blockbuster IPO calendar may reflect strong investor appetite, but appetite alone does not determine whether valuations are reasonable.
The message: confidence is earned, not hoped for
This is not an argument that record highs, by themselves, signal an imminent decline. Over long periods, markets have often reached new highs as earnings and economic activity have grown. Most of the time, it is prudent to stay invested, diversified, and patient. But a portfolio is not built on hope. Hope is not a strategy, and one should not mistake a hot streak for a plan. Portfolios should be built around disciplined allocation rather than recent momentum alone. In that sense, the basketball analogy is less about prediction than preparation: the goal is not to forecast the exact turning point, but to ensure the portfolio can remain resilient across a range of market environments. The Spurs did not walk into Oklahoma City hoping. They prepared for the moment the stars would flicker, and when Wembanyama sat, the preparation was already on the floor. Confidence in Game 7 was earned in the months before it.
Discipline at a peak is the plan, not the aspiration. In practice, that may mean reviewing allocations and rebalancing where appropriate (i.e., trim positions that have run hottest and add to positions that have lagged), so the mega-caps do not quietly become a larger bet than you intended. Own parts of the market that may not have been invited to the party. Diversification can represent bench strength, and you need the bench to keep scoring when the stars have fouled out. Confirm that liquidity and risk exposures still match your investment objectives and constraints—this may help you act rather than react if valuations move. None of those steps requires a short-term market forecast. History offers its own discipline: index concentration this extreme has appeared only a fraction of the time since 1990, and in the years after, the broader equal-weight market has tended to quietly close the gap. We are not predicting a timeline; nobody can. We are building a portfolio meant to “survive” by participate in long-term growth while remaining aligned with a disciplined investment plan, like the Spurs, through discipline, survived the Thunder.
Stay invested where appropriate. Stay diversified. Stay prepared. That discipline can help investors pursue their long-term plan through a range of market conditions. It is how a portfolio can survive a Game 7.
Go Spurs Go!
Disclaimer: This commentary is provided by Sendero Wealth Management for informational and educational purposes only. It reflects observations as of the date written, is based in part on public sources believed to be reliable, and is not investment, legal, or tax advice, nor a recommendation to buy or sell any security. References to market indexes are provided for context only; indexes are unmanaged, do not reflect fees or expenses, and cannot be invested in directly. Market and IPO details are based on public reporting and are subject to change. Past performance does not guarantee future results. Please consult your advisor regarding your specific circumstances.
