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The Bull Market Broadened Recently

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Facebook, Apple, Amazon, Netflix, Google, and Microsoft – the six FAANGM stocks -- were the runaway leaders of the new bull market that began after stocks bottomed on March 23rd, but now the rally has broadened to the other 494 companies in the Standard & Poor’s 500. It’s good news.

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The S&P 500 is a capitalization-weighted index, which makes the companies with the largest market capitalization more influential in the price of the index of the 500 largest publicly-held U.S. companies.

Over the 12 months ended Jan. 4, the widely-quoted S&P 500 index significantly outperformed the index of the 500 companies equally-weighted. Since the election, that’s changed. The equal-weighted index of the S&P 500 has outperformed the market-cap-weighted index.

The S&P 500 is a measure not just of stock prices; it’s a measure of the strength of the nation. The recent trend in which the other 494 companies in the S&P 500 are catching up to the FAANGM is good news. It indicates investor confidence in the broad economy following the leadership of the FAANGM. After a year of the pandemic, it is a sign of investor confidence in a return to normalcy. It shows the bull market is not petering out. Rather, a new leg of the bull run could be in the offing.

The broadening of the bull market has meant that large growth stocks like the FAANGM, which have dominated the Covid-19 bull market surge, have stopped outperforming value-stocks and small-capitalization company shares.

Now is a good time to check that your portfolio is properly diversified in accordance with your risk tolerance, and optimized to help you achieve your long-term investment goals.

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial or tax situation, or particular needs. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. The material represents an assessment of financial, economic and tax law at a specific point in time and is not a guarantee of future results.

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This article was written by a professional financial journalist for Heling Associates, Inc. and is not intended as legal or investment advice.

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