Dwindling Number Of Leading Stocks Signal Danger

The percentage of S&P 500 stocks outperforming the index has fallen to levels last seen in 1972 and 2000. Both previous instances preceded major bear markets.

The chart below is significant because it illustrates contracting market leadership which, by definition, are shares that outperform the index. The effect of narrowing leadership is exacerbated by the historically large weighting (circa 23%) of the top fives companies in the S&P which will amplify future index volatility.

The result, in our opinion, is a very high-risk market environment. We discuss our risk calculations at length in the recently published February issue. We also update our views on global markets, our current investment positions, and our methods to optimize risk/reward.

If you found this post of interest, you’ll find the Global Investment Letter of value. To view free sample issues and to receive our weekly investment comment please visit: https://www.globalinvestmentletter.com/sample-issue/