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With the S&P 500 mere inches away from a new all-time high, I wanted to share some thoughts regarding the health of the market as well as other interesting notes.
Towards the end of 2024, there was a great deal of focus and negative sentiment regarding lack of market breadth. Put simply, very few stocks were carrying an unproportionate amount of weighting for the broader indexes’ double digit returns.
Even though a few of the largest winners for 2024 have experienced fresh bouts of volatility this year, the breadth (volume of stocks participating) of the market has strengthened considerably.
Here’s an interesting observation – a few of the stocks we own and follow which have the greatest relative strength (stock performance compared to their historical prices and to the S&P 500 index) are quite diverse in industry type. These stocks include Amazon, American Express, Baker Hughes, Goldman Sachs, JP Morgan, Meta/Facebook, Netflix, Palantir, Telsa and Walmart. There’s a mix of technology, finance, consumer discretionary and energy companies in this top tier.
On the other hand, some of the stocks that have traveled the furthest from their best prices and which are currently lacking momentum are also diverse-- Ford, Cigna Group, Dow Inc. (chemicals), Novo Nordisk (a GLP-1 provider), Pepsi, Pfizer and UPS to name a few. There are fewer technology companies in the list, but it’s still a rather diversified list.
Communication services have been the strongest sector thus far in 2025 with companies such as Meta (Facebook) leading the way. On the other hand, the weakest performing sectors have been consumer discretionary and technology (mainly being dragged down by Microsoft and Nvidia this year after the Chinese AI-related DeepSeek buzz).
The determinations of being a “have or a have-not” are not necessarily dictated today by industry type or sector. For example, Eli Lilly remains strong after a robust 2024, but their peer and competitor Novo Nordisk has fallen behind in head-to-head performance and relative to where it’s traded in its recent past. The same comparison plays out for Amazon vs. Microsoft, Wal-Mart vs. Target and so on. As such, this is a perfect opportunity for stock selection and positioning, which are areas we relish and thrive in as active portfolio managers.
Admittedly, this may not be as interesting to you as it is to us, but this kind of “not so glamorous” work and research that we’re doing daily is an integral part of our process for positioning your financial wellness and success.
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