Narrowing market breadth worrying signal for global stocks | The Express Tribune


NEW YORK:

Investors are scrutinising the stock market’s narrowing breadth and other signs of ebbing risk appetite, as markets digest a hawkish pivot from the Federal Reserve, soaring inflation and concern over a fresh wave of Covid-19 cases.

Only 31% of stocks in the tech-heavy Nasdaq are trading above their 200-day simple moving average despite the index’s 18% year-to-date gain, according to Refinitiv data, the lowest level in at least a year. That number stands at 36% for the small-cap-focused Russell 2000.

Stocks in the S&P 500 are faring better, with 68% of constituents trading above that moving-average mark. Still, just five stocks – Apple, Microsoft, NVIDIA, Tesla and Alphabet – have accounted for about half of the index’s gain since April, data published by Goldman Sachs earlier this week showed. The S&P is up about 24% for the year and stands near record highs.

Narrowing breadth can presage a period of rocky trading, with deeper-than-average drawdowns and weaker overall returns, Goldman’s data showed. The bank’s analysts said declines may be limited this time around by factors such as strong corporate earnings and a market that may have already priced in a more hawkish Fed.

Others are less sanguine, AE Wealth Management Chief Investment Officer Tom Siomades, believes investors should brace for more market volatility.

 

Published in The Express Tribune, December 19th, 2021.

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