Stocks are flying high – kind of.
Yes, the S&P 500 is up 17 per cent in 2024 and has exceeded 5,500 for the first time. Yes, the tech-heavy Nasdaq is doing even better, up 22 per cent and trading above 20,000.
The problem though – one hotly debated in analyst reports – is that while the stock market is flying, most stocks aren’t. The average S&P 500 stock has risen less than 4 per cent.
Most stocks have been trending down recently, with more than half of S&P 500 companies trading below their 50-day moving average. Similarly, while the S&P 500′s maximum drawdown has been limited to just 5 per cent in 2024, the average stock’s maximum drawdown has been 15 per cent.
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Schwab analysts note just 17 per cent of stocks have outperformed the S&P 500 over the past year, while only 11 per cent of Nasdaq stocks have outperformed their benchmark. As Schwab notes, it’s a “tale of two markets” – one at the index level, one underneath the surface.
The 10 largest stocks now account for 38 per cent of the S&P 500′s market capitalisation. Consequently, strength in a few mega-cap tech stocks – think Nvidia, Microsoft, Apple, and so on – is able to mask weakness among individual stocks. The stock market may be partying, but not everyone’s invited – far from it.
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