Looking at short-term fluctuations can often obscure the broader trajectory of a long-term bull market. Despite recent fluctuations in market leadership, the bull market continues to show strength, underpinned by a solid foundation of robust market breadth.
2023 Sector Performance Shift
In 2023, mega-cap growth stocks took the reins in the bull market, with strong performance driving overall market gains.
The narrative has recently shifted, with communication services emerging as a new powerhouse in the beginning of 2024. In contrast, real estate faces challenges, while other sectors present a mixed performance.
Market Breadth
The growth versus value ratio displays an upward trend from September 2020, breaking out to new highs in 2024. This consolidation above key support levels often indicates a continuation of the prevailing bullish trend.
While growth stocks are anticipated to maintain their outperformance, a brief downturn could hint at a potential shift towards value stocks in the near future.
Before definitively calling a bearish turn, market breadth needs to weaken. Currently, over half of S&P 500 stocks are trading above their 200-day moving average, a sign that the overall market sentiment remains positive. Moreover, the number of new lows remains lower than in 2023, suggesting that a firm bear market has not yet taken hold.
Market dynamics are always evolving, and it’s crucial to stay vigilant of signs that could signal a change in the market landscape.