A popular call on Wall Street to start 2024 was for a broadening of the stock market rally.

But, in large part, that hasn't happened this year, with Nvidia (NVDA) alone representing about one-third of the S&P 500's gains this year.

While some have recently highlighted that a positive trend in earnings to end 2024 could still support a broadening, Morgan Stanley's chief investment officer Mike Wilson wrote in a note on Sunday that the downside surprises in economic data put a cap on any broadening to come. Wilson highlighted Citi's Economic Surprise Index, which measures the extent to which data has come in better than forecast.

The index has been tracking lower for much of 2024 and just hit its lowest level in more than a year, dispelling a common narrative about a stronger-than-expected economy supporting other areas of the market outside of large-cap corporations.

"With macro data broadly coming in softer [year-to-date], many lower quality and economically sensitive areas of the market have lagged, while a narrow list of higher quality mega caps have carried performance." Wilson said. "In our view, this is a sign the market is becoming more focused on growth softening and less focused on inflation and rates."

So investors have piled into companies that have thrived despite high interest rates and slowing economic growth. Wilson noted that this extends beyond a few large tech names to other stocks like Eli Lilly (LLY), Chipotle (CMG), and Costco (COST), which have all handily outperformed the S&P 500 this year. But, it likely won't extend to small-cap stocks at this point, Wilson said.

Importantly, Wilson added that this environment can persist without the broader market heading lower.

"Interestingly, narrow breadth does not necessarily mean weak returns looking forward," Wilson wrote. "The average cap-weighted index return 6 months after narrow breadth readings is 4%."