Unlocking Insights: Navigating Market Highs in the S&P 500
With the S&P trading at all-time highs (and closing above 5,000 for the first time), investors might assume it’s time to celebrate. However, CNBC’s Alex Harring, citing research from Bespoke Investment Group, suggests caution. Historically, if 50%-60% of stocks in the S&P are above their 50-day moving average, as they are right now, then when the index closes within one percent of its 52-week high, a year later the average S&P 500 index return is +6%—and is negative about 35% of the time.
These certainly aren’t terrible results, but they’re far from spectacular. This is especially true considering future returns have historically worsened significantly when the S&P 500 continues reaching new highs as fewer and fewer stocks trade above their 50-day moving average. If the figure falls under 50% of stocks, then historically the S&P is down 1.7% a year later, and ends lower 69% of the time. Ideally, investors want a broad-based rally—with more stocks, not fewer, trending higher.
S&P 500′S CORRELATION WITH STOCKS ABOVE 50-DAY MOVING AVERAGE
As we’ve noted before, right now a few select stocks are driving the S&P 500 upward, with its top 10 stocks accounting for a disproportionate amount of the gains seen in 2023. And the trend is continuing into 2024. But for a sustained stock market advance, the more stocks that participate, the better.
At Boyar, however, we invest in stocks, not markets. Many companies currently appear to be undervalued relative to our estimate of their intrinsic value while also having catalysts for capital appreciation.
Regardless of how the index does, if a stock is selling below its true worth, and investors have reason to believe its market value will advance (within a reasonable time frame), then prudent investors still have the potential to set themselves up well for future gains, even in today’s investing environment.
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Important Information: Performance Information. Past performance does not guarantee future results. The reports in this sample are for informational purposes only and the performance of the stocks selected is not indicative of the performance of all the stocks profiled in Boyar Research. The performance of the stocks selected and the performance of the stocks in Boyar Research may in fact diverge materially. Additional information regarding the performance of other companies featured in Boyar Research is available from Boyar Research upon request. This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by affiliates of Boyar Research. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein.