Global stock rally continues to broaden

Stocks slipped last week, but 2023′s equity rally looks much healthier than it did a few months ago. The so-called magnificent seven – Apple, Microsoft, Amazon, Alphabet, Nvidia, Facebook, and Tesla – carried indices in the first five months of 2023, prompting concerns about a thin and ultimately unsustainable advance.

For most of May, only around half of S&P 500 stocks were above their 50-day moving average. The equal-weighted version of the S&P 500, which weighs each component stock equally, was in the red for 2023 at the end of May.

Since then, however, the rally has broadened. Recently, 90 per cent of stocks traded above their 50-day average. The equal-weighted index has begun to outperform, gaining 12 per cent in less than two months. All 11 S&P 500 sectors advanced in June and again in July, up from only three in May. This same broadening can be seen outside the US.

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S&P Dow Jones Indices data shows 13 of 16 European countries advanced in July, with nine of 11 European sectors finishing in the black. European cyclical stocks that badly lagged this year have rallied lately, says Barclays. It notes that globally, only around 30 per cent of MSCI world stocks outperformed in May, but over half did so in July. Meanwhile, technology stocks are “not so much in the lead any more”. “Larger breadth is healthy”, says Barclays, so it’s good news the rally “has finally started to broaden out”.