The Breadth of the Stock Market Shows It’s Not 1999 All Over Again

Morgan Stanley's Wilson Sees S&P Hitting 2,700 in 2018

For the market bears trying to draw comparisons between today’s bull market and that of the late ’90s, here’s a reason the link may be unwarranted.

Market breadth is alive and well, with more than 70 percent of S&P 500 members advancing, analysts at Strategas Research Partners including Chris Verrone, head of technical analysis, wrote in a note Tuesday. That wasn’t the case in 1999, when less than half of S&P 500 members rose. In 2007, before the crisis, just 50 percent of stocks ended the year higher.

“This may not be the broadest market we’ve ever seen but it’s not even close to the narrowest,” Strategas said.

With tech companies up nearly 40 percent this year versus a 16 percent advance for the overall S&P 500, there’s been a lot of buzz around FANG stock dominance. Facebook, Amazon, Microsoft, Apple and Alphabet (GOOGL and GOOG combined) have the biggest weightings in the S&P 500, making up about 14 percent of the gauge. Technology companies make up about a quarter of the index, which hit 2,600 for the first time today, reaching its fourth round-number milestone this year.

Another way to see the breadth behind an index’s gain is to compare one that shows market-value biases with one that doesn’t, a so-called equal-weighted gauge. If a market-capitalization weighted index outpaces its equal-weighted counterpart, then larger, and possibly fewer, companies are driving the gains. In 1999, the point spread between the cap-weighted S&P 500 and the equal-weighted one was about four times what it is now, according to Verrone.

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