The S&P 500 is on track to log what could be its fifth consecutive record close on Thursday.
But other gauges of the U.S. stock market’s strength aren’t looking nearly as rosy.
Take the Value Line Geometric Index
VALUG,
an equal-weighted index that tracks the median performance of the roughly 1,700 largest listed companies trading in North America. The index is still trading well below its record highs from November 2021, according to FactSet data — roughly 17% below, in fact.
What can investors learn from this discrepancy between the Value Line Geometric Index and the S&P 500
SPX
? For starters, the performance gap offers some insight into how a handful of megacap technology stocks have driven much of the S&P 500’s advance over the past year.
The gulf between the two indexes is “reflective of the increased concentration that we have in large-cap stocks,” said Steve Sosnick, chief market strategist at Interactive Brokers, in an interview.
Comparing two other indexes offers even more insight into the dynamics presently dominating the U.S. market. For example, investors can look at the performance differential between the Russell 2000
RUT
index of small-cap stocks and the broad-based Wilshire 5000
XX:W5000FLT,
which includes roughly 3,500 actively traded U.S. stocks.
As of late Thursday, the Wilshire 5000 was trading at 49121.30, just 0.1% shy of its most recent record high from Jan. 3, 2022.
By comparison, the Russell 2000 is trading roughly 20% shy of its record closing high from November 2021.
This disparity “reaffirms the idea that it’s really a matter of small caps versus large caps,” Sosnick said.
That notion is further reinforced by the relative performance of the S&P 500 growth index compared with the S&P 500 value index. Their performances over the past three months show how high-quality value stocks have played catch up to the “Magnificent Seven” and the other market leaders in the tech space.
Since Oct. 31, the S&P 500 value index was up about 14% through midday trading on Thursday, while the S&P 500 growth-factor index was up 17%. Still, over the past 52 weeks, their disparity in performance is much wider — in the form of a 29% gain for the S&P 500 growth index, compared with a 13% gain for large-cap value stocks.
The S&P 500 was up 0.2% in afternoon trading on Thursday, on track to finish at around 4,877, according to FactSet data.
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