Rudi’s View: The Index Is No Longer The Market

Rudi's View | 10:00 AM

Investors might be surprised about the level of similarities between equity markets in the US and domestically, plus fund managers' favourite ASX stocks.

By Rudi Filapek-Vandyck, Editor

With the end of September in sight, the S&P500 is only one positive session away from setting a new all-time record high, but you wouldn't know if all you had were the statistics below the US share market's surface.

No fewer than 410 stocks (82%) out of those 500 are currently trading more than -10% below their own record high. 59% (295 stocks) are currently more than -20% below peak.

According to one particular technical definition, any asset trading -20% and more below its prior reference point is considered in a bear market.

Now that we mentioned technicals... 71% of S&P500 stocks are reportedly trading below their 50-days moving average, while 59% are trading below the 200-days moving average.

So, is this the most unusual bull market for equities, or what?

Is Market Concentration The Full Story?

What we do know is that market concentration around a new all-time record high has probably never been this narrow.

In other words, never before has such a small number of Winners pushed the index into uncharted territory while such a large part of the index is unable to contribute positively.

And yet, whether this setup is simply a reflection of today's changing world or the surest sign of a market bubble waiting to burst remains 100% up for debate.

For starters, the average percentage of US stocks that beats the S&P500 has been in steady decline for two decades now.

General outperformance occasionally rises as a result of sell-offs and temporary bear markets, but the underlying trend has steadily narrowed over that period, and accelerated yet again since the arrival of AI and technological disruption.

The fact that US indices are only carried by a small minority of strong outperformers is in itself nothing new.

Contrary to general perception, that has been the case for many years although, admittedly, it is currently approaching a new level of extreme.

But even before this month, the sheer volume of warnings about a bursting bubble on social media posts, through videos on YouTube and in mainstream financial publications has been nothing less than astronomical.

Here too, nothing's genuinely new. My social media feed has been rife with such warnings since 2024, and longer.