The fact that the S&P 500 is back near multi-year highs is certainly enough to make bulls happy. That being said, the rally has hardly been broad. As one example, the Utilities sector, which is comprised of 31 stocks in the S&P 500, was down every day this week. Earlier in the week, we also noted that in the most recent leg higher, the Russell 2000 has been underperforming the S&P 500.
In terms of new highs, we have also seen a narrowing of the rally. Back in late March and early April when the S&P 500 made a new bull market high, the number of stocks in the S&P 500 hitting new highs got as high as 78, or 15.6% of the index. Today, however, the number of new highs was just a little more than half the peak reading we saw in the Spring. Of the 500 stocks in the S&P 500, there were 42 stocks that hit a new high (8.4% of the index).
The reason for the smaller number of new highs stems from the fact that the rally is being led by megacaps (like AAPL), which stocks with smaller market caps have lagged. This doesn't necessarily mean that the rally is doomed. Rather, the less broad based nature of the rally means that it is imperative for investors to be in the right stocks. For a lot of us, just summoning up the courage to get into the market is hard enough. Now, we also have to worry about picking the right stocks! Investors looking to get started on that task can sign up for Bespoke Premium and see the 50 growth stocks that Bespoke likes most.
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