Retail sales are jumping, workers are returning to offices, and services sector businesses are ramping up for a summer surge. The market is up over 11% YTD, but we see reasons to remain bullish, one of them being widening stock participation in the rally.
Last year the 10 largest stocks in the S&P 500 (as measured by market cap) outperformed the rest of the index by 9x. The wide performance dispersion of the largest stocks in the S&P 500 was further compounded by wide sector dispersion, highlighted by robust performance in Technology and Communication Services stocks, and negative performance in Energy.
This year it’s a different story. The Energy sector is the best performing, but every sector is positive YTD and the dispersion between the energy sector and others is more inline with historical dispersion. In addition, the performance of the 10 largest stocks in the S&P 500 vs. the remaining 490 is nearly identical, further highlighting narrowing performance dispersion and broader participation in the economic recovery rally.
Bigger picture? With broader depth the overall market rally is likely 1) more sustainable, and 2) better positioned to withstand a pull-back in “hot” growth stocks, similar to what markets experienced at the end of 1Q
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.
The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance is no guarantee of future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
A word on risk
All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Equity investments are subject to market risk or the risk that stocks will decline in response to such factors as adverse company news or industry developments or a general economic decline. Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, tax risk, political and economic risk, and income risk. As interest rates rise, bond prices fall. Non-U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging markets. This report should not be regarded by the recipients as a substitute for the exercise of their own judgment. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.