Market environments are driven not just by industry preferences, but also by a bias toward the very largest companies. We have developed a new set of groups composed of the 10 largest companies from each sector. With several of these baskets sporting positive rankings, we felt a closer look was in order.
Companies are returning cash to investors at a level never before seen. Counting dividend payouts and outstanding share repurchases, the amount of cash returned back to investors crossed the $1 trillion mark for the first time in January 2016 (based on trailing twelve-months’ total for the largest 500 companies, Chart 1).
While U.S. stocks have surged this year, Emerging Markets have languished. What is going on in Emerging Markets to cause this unusual situation?
One might begin to think that if the reports of money supply growth rolling over are true, that the stock market could be facing its own liquidity crisis in short order. While these reports sound pretty bleak for future stock market liquidity, we advise taking these headline “scare” stories with a grain of salt.
Market breadth improving, but still relatively weak. Narrowing breadth can, however, persist for a long time. There was a two year period of diverging breadth in 1998 to 1999, prior to the last bear market.