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Investment Strategy

Reading the Tea Leaves: Three Key Investment Themes

By Elliott H. Gue, on Apr. 16, 2015

The S&P 500 has traded in a tight range since mid-November 2014, generating a total return of 3.9 percent. Although this index of large-capitalization stocks has stalled, the broader universe of US equities has shown signs of improvement. For example, the Russell 2000 Index, which tracks small-capitalization names, has rallied by more than 9 percent over this period.

The Russell 200 and the S&P Small-Cap 600 Index have both reached record highs, while the S&P 500 has struggled to sustain a rally to more than 2,120 for more than a few hours.

In late 2014, we began to warn investors of the rising risk of a more serious market downturn this year. Our concerns were twofold: narrowing leadership in the stock market and signs of weakness in the US economy.

The S&P 500 rallied to a series of record highs last year, but the number of stocks leading the charge narrowed considerably. Check out this graph tracking the number of equities traded on the New York Stock Exchange (NYSE) that hit a 52-week high on a given day.

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