The Gap Remains

CAMS Weekly View from the Corner – Week ending 5/29/2020

June 1, 2020

We continue to monitor the general health of the overall stock market.  To date, it remains unimpressive.

We emphasize the overall stock market versus select individual companies or even indices that are weighted and hence more narrow in their representation of what is taking place within the market.

In recent editions we have shared a view of the weighted S&P 500 whereby certain components have a larger impact on the performance of the index via their weighting and the equal weighted S&P 500 which gives each company an equal impact on the results.

This is one basic approach to get a sense of the general health of the market as determined by the differential of performance between the two indices.

SPY - 6.1.20
Click For Larger View:   http://schrts.co/DDwvdQgx

The above chart encompasses the current year-to-date performance of the weighted S&P 500 (black line) and its equal weighted counterpart (blue line) for 2020.

While both have continued to improve off the panic lows of mid-March the on-going gap between the two remains and seems to be entrenched on a trend basis.  We have called this general environment a “Stock Picker’s Market” in previous editions and this description continues to hold true.

Currently the performance differential is just over 7% which is a notable difference.  This tells us a wealth of individual stocks throughout the market are not doing nearly as well as some select companies.  Hence the Stock Picker’s Market labeling.

There are a tremendous amount of issues challenging this market landscape – from continued historically high valuations to a disjointed economic reestablishment just two name two large theme’s that offer important tributaries within each of them.

With this general backdrop it offers the near perfect environment for select companies to perform and even thrive while the general market languishes.

We will continue to monitor and to share but at this stage the market dynamics continue to point to a more concentrated portfolio approach versus a large broad basket holding of various stock market investments.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio

Footnote:

H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP).  This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”.  A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.