Delving Into The 2023 Market Through Mid-October

When viewing the first year of a bull market after previous declines some similarities exist. Reviewing bull markets – October 1990, October 2002, March 2009, and March 2020:

• Banks and small companies led the markets
• Earnings predictions rose in three out of the four bull markets
• The majority of companies’ share prices increased

According to the Wall Street Journal article, “There’s a Reason This Bull Market Feels So Weird” by James Mackintosh:

• Large number of stocks declined yet the S&P 500 increased
• Just the opposite occurred from the previous four bull markets – banks and small companies declined
• Over the last 12 months only two-thirds of the companies in the S&P increased compared to 88% – 97% in the bull markets identified above
• Russell Microcap Index is still down from 2022
• Russell 2000 (small companies) is basically flat
• Eight companies account for half the S&P gains

None of us can predict the short-term gain or loss of the indexes but the concentration in so few stocks that are driving the return is disconcerting. It is one of the reasons when we design a portfolio, we use a combination of passive (index) funds along with actively managed funds.