In This Article:
The performance gap between the cap-weighted S&P 500 — tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) — and its equal-weighted sibling, the Invesco S&P 500 Equal Weight ETF (NYSE:RSP), has blown out to over 4 percentage points in December.
This marks the widest monthly gap since May 2023, reflecting how a narrow group of stocks is shouldering the market's returns in the last month of the year.
As of Dec. 17, only 90 out of 500 stocks in the S&P 500 are in positive territory month-to-date, a shockingly narrow market breadth.
Excluding Nvidia Corp. (NASDAQ:NVDA), all of the Magnificent Seven stocks — Apple Inc. (NASDAQ:AAPL), Microsoft Corp. (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon.com Inc. (NASDAQ:AMZN), Meta Platforms Inc. (NASDAQ:META), and Tesla Inc. (NASDAQ:TSLA) — have posted gains this month.
If Broadcom Inc. (NASDAQ:AVGO), which recently surpassed the $1 trillion market-cap threshold, is added to the mix, an equal-weighted portfolio of these eight stocks has already delivered a stunning 16% return so far in December.
That stands in stark contrast to the broader market's struggles as the equal-weighted S&P 500 index fell by 3% month to date.
| Name | Price Chg. % (MTD) | Market Cap ($) |
|---|---|---|
| Broadcom Inc. | 48.27 | 1.12 trillion |
| Tesla, Inc. | 37.03 | 1.52 trillion |
| Alphabet Inc. | 16.72 | 2.43 trillion |
| Amazon.com, Inc. | 11.18 | 2.43 trillion |
| Meta Platforms, Inc. | 9.15 | 1.58 trillion |
| Microsoft Corporation | 7.25 | 3.38 trillion |
| Apple Inc. | 6.52 | 3.82 trillion |
| NVIDIA Corporation | -5.94 | 3.18 trillion |
| Average | 16.26% |
Weak Breadth: Bad Sign Or Hidden Opportunity?
Ryan Detrick, CMT, chief market strategist at Carson Group LLC, highlighted a notable trend.
The S&P 500 has now posted 11 consecutive days of more decliners than advancers, tying the longest streak since 1996.
While many investors might view this as a bearish signal, historical data paints a surprisingly different picture.
"Many claim this is bearish, but is it?" Detrick stated. "Looking at the longest streaks ever actually appears to be rather bullish. Significant outperformance across the board out one year."
Here's how the S&P 500 performed historically following similar stretches of negative breadth:
| Date | Days of Negative Breadth | 1-Month | 3-Months | 6-Months | 1-Year |
|---|---|---|---|---|---|
| 9/10/1991 | 8 | -2.1% | -1.4% | 6.0% | 7.9% |
| 6/20/1996 | 11 | -4.3% | 3.2% | 10.5% | 35.6% |
| 12/24/2018 | 8 | 13.3% | 19.3% | 23.9% | 37.1% |
| Average | — | 3.0% | 4.8% | 8.6% | 14.8% |
| All Years Avg | (1950–2023) | 0.7% | 2.2% | 4.4% | 9.0% |
Notably, the historical data shows that returns tend to improve significantly over the next year, with 87.5% of cases showing positive performance after a prolonged stretch of weak breadth.