S&P 500 Rally Toward Record Broadens as Equal-Weight Climbs – Bloomberg 03-21-13

Salient to Investors:

The majority of companies surpassed their previous highs by April 2011. 59 percent of S&P 500 stocks have exceeded their previous records set before the Index peaked in 2007.

Unlike past bull markets, where a single industry dominated, all groups have improved in this rally. None of the 10 industry measures represents more than 18 percent of the S&P 500 index, versus in 2000 when tech made up 35 percent of the index and in 2006 when financial stocks made up 22 percent.

Stephen Wood at Russell Investments said the breadth of this rally is remarkable – small, medium, large, defensive, dynamic, value, growth.

Retailers, restaurant chains and other discretionary consumer stocks are up 231 percent since the bottom, financials and industrials have almost tripled, and tech, commodity and health-care stocks are up more than 100 percent. 7 S&P 500 companies have risen over 1,000 percent since March 9, 2009.

S&P 500 earnings have risen to $100.75 a share in 2012 from $61.83 in 2009.

Richard Slinn at JPMorgan Private Bank said the market reflects fundamental improvement, earnings growth, revenue growth and dividend growth, more than price momentum. Slinn said investors are naturally hesitant to jump into something they feel has risen too far, but they are wrong.

The 1990s bull market was dominated by rallies in larger US companies and tech stocks. Cisco led gains in the S&P 500 during the 1990s rally, rising more than 111,000 percent while Microsoft increased 6,831 percent.

Kevin Caron at Stifel Nicolaus said the 1990s were all about tech, but the earnings improvement is coming from a myriad of places.

The S&P 500 Equal Weighted Index rose 157 percent from 2002 through 2007 versus 102 percent for the S&P 500 and 159 percent for the Russell 2000. In the current bull market, the S&P 500 Equal Weighted Index has exceeded the S&P 500’s advance by 47 percent.

Alan Gayle at RidgeWorth Capital Mgmt said when the largest stock in the index, Apple, goes parabolic to the upside, that tends to make the overall S&P 500 look very attractive, but now that Apple has come back to earth, we can see that the broader market in fact has been recovering nicely.

The S&P 500 has lagged in surpassing its record. The Russell 2000 and Dow Transports hit new all-time highs in April 2011, the S&P Midcap 400 Index in January 2011, the Dow Industrials in March 5. The Nasdaq Composite and Nasdaq 100  are trading below March 2000 peaks.

David Bianco et al at Deutsche Bank said since 1945, the S&P 500 has risen for 30 more months after exceeding a previous record with an average gain of 59 percent, or 18 percent annualized, while only 3 bull markets have lasted less than a year after exceeding all-time highs – 1972, 1980 and 2007.

William Fries at Thornburg Intl Value Fund said one things different from 2012 and 2011 is cash flows into equities in mutual funds.

Read the full article at http://www.bloomberg.com/news/2013-03-20/s-p-500-rally-toward-record-broadens-as-equal-weight-climbs-192-.html

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