With the pullback over the last two weeks, the S&P 500 is now just +2.77% on the year while the Dow Jones Industrials index is -5.38%. We have highlighted the disparity in returns a few times this year when looking at winners and losers from the COVID crisis. Only 27% of the companies in the Dow have a positive year-to-date return as of 10/30.
The Small Cap Russell 2000 has only 30% of its companies in the black this year while just 33% of the S&P Mid Cap index is above water. This means that the stock market recovery has lacked breadth. More companies are struggling this year than are doing good. This is to be expected with all of the upheaval that has occurred, but it is sometimes difficult to remember when all we hear about is the stock market recovery and that tech companies are doing so well. Turnarounds take time to accomplish.
There are bright spots, companies that have responded well to the turmoil. The S&P 500 has 41% of its companies reporting positive returns this year, and large-cap tech which comprises the largest sector in the S&P 500 has been the standout performer in 2020. But valuations have been stretched and multiples expanded. Since the market high of 9/2, the tech-focused Nasdaq 100 has fallen -3% more than the S&P 500. There may be a rotation coming from the hot tech sector to all the laggards that have been left behind.