Narrow Market Signals Exhaustion
A small number of mega cap stocks are propping up the market, reminiscent of the 2000 stock market bubble.
Historically, A Narrow Market Has Signaled Exhaustion
Roughly a quarter of stocks are outperforming the S&P 500 (broad market).
A few highly valued, mega cap stocks are generating most of the returns for the S&P 500.
The rest of the S&P 500 companies, about three quarters, are underperforming the index.
This last occurred during the bubble of 2000.
If history is a guide, this handful of overvalued stocks will eventually roll over and the stock market has suffered significantly.
Investors in the retirement red zone should revisit their risk exposure.
LPL 589636-1
DEFINITIONS
S&P 500 Index - The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90. The index is a capitalization weighted index of the 500 large companies listed on various stock exchanges (such as the NYSE or NASDAQ). The S&P 500 was developed and continues to be maintained by S&P Dow Jones Indices, a joint venture majority-owned by S&P Global. The S&P 500 differs from the Dow Jones Industrial Average and the NASDAQ Composite index, because of its diverse constituency and weighting methodology. It is one of the most followed equity indices, and many consider it one of the best representations of the U.S. stock market.
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Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer.
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