A Rebound In Global Equities May Have Negative Consequences For The S&P 500

The share of MSCI global equities beating the index fell to an extreme of just circa 30% in 2020 before beginning a recovery in September. Similar extremes occurred in May 1999 (some 7 months before the top of the internet bubble) and March 2008 (shortly after the S&P peaked).

U.S. stocks represent a large share of the MSCI Index (66.8%) suggesting that the rising share of companies outperforming the index indicates that capital may be moving to non-American equities and/or that we may be at the early stages of a rotation of market leadership in the United States. Either case eventually produces a period of weakness for the S&P 500.

The successful distribution in 2021 of an effective vaccine may be the spur for a change in market leadership. Failing that, there remains a host of potential catalysts that produce a similar effect.

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