The Momentum in Stocks Has Stalled

The aggregate weight of the top 10 stocks in the global market-cap-weighted index reached an all-time high of 16.6% in September 2020.

When we look at fundamentals (company revenues, cash flows, dividends plus buybacks, and book value) between the tech bubble and Sept, the two groups’ combined fundamental weights are 5.4% and 6.9%, respectively.

The concentration level is just as dangerous as it was during the tech bubble.

AND in 2020, JUST 10 stocks contributed 40% of the global index’s total return.

Momentum in stocks has stalled

While some will say that the underperformance of the cap weighted S&P is a reflection of a change in market leadership, this overlooks the fact both the S&P 500 and the S&P 500 Equal Weight started stalling in the Feb/March time frame. The market as a whole has lost steam.

Prices = 5 day moving trimmed mean (70%) – 35 day moving trimmed mean (70%)


Asset Allocation

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