The S&P 500 has reached new highs, contrasting a sell-off in April, but analysts caution about the lack of broad company participation. Narrow market breadth indicates potential weakness; historical analysis shows below-average returns when fewer than 100 NYSE companies hit new highs alongside the S&P's peak. Currently, five major tech firms comprise over half of the index's returns, raising concerns about sustainability. Moreover, most S&P stocks remain significantly below their recent highs, highlighting a troubling disparity in market performance.
Since 1972, the S&P 500 has shown below-average returns when its all-time high coincided with fewer than 100 NYSE companies hitting new highs.
Just five stocks—Amazon, Broadcom, Meta, Microsoft, and NVIDIA—are providing over half of the S&P 500's total return, indicating narrow participation.
When a market rally is driven by only a few companies, the risk of losses increases, particularly if these companies struggle.
The median S&P 500 stock is trading about 12% below its 52-week high, while the index approaches a new high.
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