Gavekal Capital: Stock Market Breadth Is Decaying To 2008 Levels

Thursday, July 31, 2014

Stock Market Breadth Is Decaying To 2008 Levels

As we are approaching the closing bell today and looking at the worst day for the S&P 500 since April 10th, and possibly only the 4th roughly 2% down day of the year, we thought it would be a good time to highlight the deteriorating breadth in the stock market.

Specifically, we are looking at the percent of companies outperforming the MSCI World Index across a variety of time slices. The first chart is the most eye-popping. Currently, only 44% of the stocks in the MSCI World are outperforming the index. This is the fewest number of outperforming stocks since October 28th, 2008. As this chart shows, the breadth indicator tends to only slightly lead the MSCI World Index by about a month.

Finally, the the data is nearly as bad looking at it from a 200-day perspective and from a 100-day perspective breadth has significantly deteriorated over the past two months.

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
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