Breadth

Schlindwein AssociatesInvesting, Market Observations

The broad U.S. stock market posted a strong return for the first half of 2024. Notable was the performance of several mega-cap stocks that rode the wave of all things AI. As indexes such as the S&P 500 weight stocks by market capitalization or size, returns of the largest stocks can have a disproportionate impact on market return. Sustainable market trends usually are characterized by breadth, i.e., many stocks rising rather than a few. An uptrend led by a few stocks can be sustained, until it isn’t. A reversal can be dramatic and costly. A review of individual stock returns by a series of measures can help provide context for market breadth and sustainability of the current market uptrend.

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