Narrow Market Exceeds 1929, 1999, and 2008
A Concentrated Narrow Market
Investors crowding into a handful of well know, highly valued names is common during the final stages of a bull market.
The ‘percent of the stock market return attributable to the 10 largest companies’ recently surpassed 1999 and is at a level last seen in 1929.
Market returns will need to broaden out in order to avoid the drawdown typically experienced at these moments in history.
Values of the 10 Largest companies the highest in recent history
Apollo Global Management provides the chart below, outlining the median 12 month forward PE ratios going back to 1990 (PE = price/earnings).
The median 12 month forward PE ratio for the 10 largest companies, today, is the highest in recent history and exceeds 2000 and 2008.
Eventually exhaustion set in and the market runs out of buyers at these high valuations.
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DEFINITIONS
Apollo Global Management – is an American private equity firm.[2] It provides investment management and invests in credit, private equity, and real assets.[3][4][1] As of 2022, the company had $548 billion of assets under management.
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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