Same As Before

| July 13, 2018
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Concentration at the top.

That proportion of a handful of stocks leading the market is nothing new, however, according to Ned Davis Research Group Chief U.S. Strategist Ed Clissold:

“The top five stocks have often had a higher weight than the bottom half. Since our common stock data set begins in 1972, the average weight of the top five stocks has been 14.3% versus 11.7% for the bottom half. The bottom half’s current weight of 13.7% is only 0.8% points below the record high set in June 2014.”

Currently, the big five make up 14.0% of the S&P 500’s market cap, while the bottom 250 account for 13.7%, according to Clissold.

What’s concerning for him is that those mega-cap companies are hogging all of the index’s gains, noting that although the S&P 500 is within 2.5% of its January 26 peak, only 12.5% of stocks in his multi-cap universe are at 52-week highs, compared to 38% in January.

That means that the gains are more and more concentrated, a sign of a “narrowing market” that may soon reach its peak.

So concentration at the top should not be a concern, but the attribution should be.


Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O


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