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The S&P 500 finished July up 2.2%, adding to what’s been a strong year so far.

This market has been a clear example of both a lockout rally and a thematic bull run. If you were positioned in the right sectors, you likely did really well.

But just as July ended on a high note, August kicked off on a rough note.

This past week was packed with big macro events. We had the Fed’s rate decision, fresh inflation data from the PCE report, and the latest jobs numbers. That mix of a still-stubborn Fed and a weaker-than-expected labor market created a tricky setup. Combine that with an extended market, and the result was a fast, sharp pullback.

None of this should really be surprising, if you looked at the market clues especially after nearly four months of non-stop gains.

Now we’re heading into the part of the year that tends to be more challenging. August is usually flat, and September is historically the weakest month before we enter the strongest season of the year.

Looking at history, the Nasdaq 100 often starts August with some volatility. Since 1985 follow a double-dip pattern with a W-shaped recovery into the end of the month.

This pullback ended a 68-day streak of the S&P 500 staying above its 20-day moving average. After such a long run without even a small pause, some weakness now is perfectly normal.

One thing to keep an eye on is how concentrated the market has become. Right now, Nvidia and Microsoft alone make up nearly 15% of the S&P 500. That’s the highest level of concentration we’ve ever seen for just two stocks.

The Mag7 are now roughly the same size as the bottom 433 companies in the index combined.

Is that a problem?

Not really. In fact, it makes sense.

These are some of the best companies…