The S&P 500 is reaching all-time highs, yet more stocks are declining than advancing on most days.
That's what we saw last week!
But does it matter?
Below is a table showing instances of the S&P 500 reaching all-time highs, with more stocks declining than advancing, along with the weekly forward returns:
(right-click and open image in new tab to zoom in)
The Takeaway: On Friday afternoon, there was a lot of discussion on X, with many bears highlighting that poor breadth readings while the S&P 500 index is at all-time highs are a bearish signal for the markets.
I usually pay little attention to what perma bears are saying; instead, I prefer to dig into the data and decide whether the information is valuable or not.
Since 1950, there have been 25 instances where the S&P 500 is reaching all-time highs, yet more stocks are declining than advancing on most days.
On average, a year later, the median return is 14.9%, with positive returns occurring 78% of the time. In years that continued with strong performance, the average gain was 18.5%. Conversely, if weakness followed, the average loss was -10.3%.
While a market correction may occur, the probability indicates that the stock market will likely continue to rise, and any negative breadth issues should not be a concern just yet.
