Tricky Markets

Global stock markets have performed well this year, with most major indices generating high single-digit to low teens returns.   However, if you look ‘under the hood' of those returns you will see that only a small group of stocks are generating most of the returns, especially in the U.S.  According to a recent Goldman Sachs study, over 90% of the year-to-date returns in the S&P 500 are coming from just 15 stocks!

Usually, when stock market performance gets very narrow in their performance it can be a troubling sign for future returns.  The below chart from Goldman shows that market breadth (a measure of how broad/narrow market performance is) has fallen to one standard deviation below average for the first time since 2020.   For the stock market to continue rallying in a healthy fashion we would like to see market breadth broaden out.