The late summer positivity is pervasive on Wall Street.<\/p>\n
That\u2019s what a massive rally in stock prices will do.<\/p>\n
Consider us as excited as everyone else that the S&P 500 has soared more than 30% since its April low. Recency bias will lead investors to feel like the good times are likely to keep rolling (and roll on they might). But let\u2019s take a moment to appreciate the significance of what equities have done and point out some unusual features of our current market conditions.<\/p>\n
When the S&P set a new all-time high on June 27, it capped the benchmark\u2019s swiftest-ever recovery from a decline of at least 15%. In only 89 trading days, the S&P lost 20% from its high, then rallied all the way back.<\/p>\n
Since then, the positive momentum has persisted, albeit at a slower pace. The S&P rose 2.2% in July and has grinded slightly higher thus far in August. But as the largest companies continue to deliver the biggest gains, the market has become ever more concentrated. <\/p>\n
The largest seven stocks in the S&P 500 (Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta and Broadcom) now make up 35% of the benchmark. If we include the 10 largest companies, that number rises to 40%. Earlier this month, Nvidia\u2019s market capitalization grew so large that it became the first company to represent 8% of the S&P 500 on its own. <\/p>\n
In terms of sector performance, technology\u2019s trailing three-month returns have doubled the second- and third-best sectors. The NASDAQ finished July on one of its longest-ever stretches trading above its 20-day moving average (second only to a period in 1999). With that in mind, it\u2019s no wonder you\u2019re starting to hear comparisons between current market conditions and the late 1990s. <\/p>\n
Those comparisons are, of course, premature, but current valuations are by no means cheap. The S&P\u2019s forward price-to-earnings (P\/E) ratio has climbed above 22. Only once in the last 10 years has its forward P\/E topped 23. In other words, these are not unprecedented levels but certainly unusual. <\/p>\n","protected":false},"excerpt":{"rendered":"The late summer positivity is pervasive on Wall Street. That\u2019s what a massive rally in stock prices will…\n","protected":false},"author":2,"featured_media":74770,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,63,99,171],"class_list":{"0":"post-74769","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-markets"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/74769","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=74769"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/74769\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/74770"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=74769"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=74769"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=74769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}