Chief among them were sharp moves in the bond market that indicated worsening expectations for economic growth and inflation. Critics also noticed that a dwindling number of stocks was driving the broad market’s rise toward more records.
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Banks, airlines and other industries that depend on a strong economy to thrive were among the losers as doubts crept into the market that the economy could fulfil investors' lofty predictions.
That's in sharp contrast to the first five months of the year, when 87% of stocks in the S&P 500 rallied and the index rose 11.9%. It’s a concept that market watchers call “breadth,” and they say it’s a healthy sign when many stocks are lifting the market.
What's driving the broad market higher this summer are the relatively few most influential stocks. Apple, Microsoft and other Big Tech stocks all rallied powerfully through June and July, for example, in part because investors expect them to grow almost regardless of the economy’s overall strength.
Because they’re so massive, and because the S&P 500 gives more weight to movements by stocks with larger valuations, gains for these Big Tech stocks are masking weakness across much of the rest of the market.
To be sure, measures of breadth in the S&P 500 are still above their average levels for the past few decades.
But breadth has nevertheless narrowed sharply from earlier this year, marking an inflection point for the market. And looking at stocks beyond the S&P 500, which only includes the biggest
While the S&P 500 is still within a few per cent of its
Stocks from emerging markets have also struggled as the pandemic worsens in many countries due to the delta variant. The MSCI Emerging Markets index, which includes stocks from
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