The 2023 stock market rally has entered a healthier phase in the past month.

With sectors like financials (XLF) and small caps (^RUT) surging amid Fed pivot euphoria, the recent leg higher hasn't just been a story of seven large-cap tech stocks.

Research from Morgan Stanley chief investment officer Mike Wilson shows 78% of the S&P 500 (^GSPC) stocks were above their 200-day moving average last week, matching the highest levels of this year.

"Over the past month, we've experienced arguably the best stretch of breadth improvement in 2023," Wilson wrote in a note on Monday.

The notably bearish strategist described the broadening out as "an encouraging sign," a nod to the fact that market breadth has been a key sticking point for many who have doubted the S&P 500's 2023 rally.

Many have pointed to charts that show how gains in the "Magnificent Seven" tech stocks — Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) — carried the benchmark average for most of the year.

In early October, Charles Schwab chief investment strategist Liz Ann Sonders likened the Magnificent Seven's rise to an army. Those stocks were serving as generals leading the rally, but until the "soldiers," or other stocks in the S&P 500, joined the front, the rally wouldn't be seen as strong.

But now, as the S&P 500 is once again pressing near all-time highs, the generals have brought support.

Analysis from Yahoo Finance's Jared Blikre shows the largest gainers in the S&P 500 over the last month are Bath & Body Works (BBWI), Illumina (ILMN), and Norwegian Cruise Lines (NCLH), all of which have risen more than 35%.

Meanwhile, none of the Magnificent Seven have gained more than 8% over the last month. Tesla, which is up about 7.9% in that time, has led the Magnificent Seven but is barely in the top half of individual gainers in the S&P 500 since Nov. 17.

Sonders's colleague at Charles Schwab, senior investment strategist Kevin Gordon, said the market rally has become healthier and "broadened out." Gordon pointed to the Russell 2000, which has gained nearly 15% in the last month.

"There's been so much argument over whether it is a sustainable bull market," Gordon told Yahoo Finance. "And so far, that hasn't been the case. But now you're finally starting to get some action from [small caps], that you would typically see [in a bull market]."

Gordon pointed out that this narrative has played out in markets already this year but proved to be a head fake late in the summer. But this second chance at a broadening of the rally could be different, according to Gordon.

The key will be a continuation of the current trend which has seen movement from the 2023 leading sectors like Technology (XLK), Communications Services (XLC), and Consumer Discretionary (XLY) into areas like Financials, Industrials (XLI), and Real Estate (XLRE).

This has played out amid the market surge over the past month with the latter three sectors among the highest gainers in the S&P 500. If that continues without the Magnificent Seven falling off a cliff, then the market rally may have reached its "nirvana," Gordon said.

"We'll see if it actually pans out," Gordon said. "But I think that if this signal from the market in the past month is to be believed in, it is continued, then that would tell me that the economic picture is getting a lot better for next year."

Josh Schafer is a Reporter for Yahoo Finance.

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