Better Breadth?

The median S&P 500 stock getting in gear could fuel strength in H2

After a few days away from the desk during this holiday-shortened week, our regular publication schedule returns next week (including updates to the weight of the evidence and our discretionary and systematic portfolios).

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Key Takeaway: The S&P 500 climbed to new highs in Q2, while the median stock in the index is no higher than it was in mid-January. But the tide could be turning: in June, the median stock posted its best gain since October and outperformed the index for the first time in five months.

More Context: Both the S&P 500 and the median stock in the index were up nearly 9% after the first five weeks of the year. Over the remainder of the first half of the year, the index climbed another 6% while the median stock fell nearly 3%. The index outperformed the median stock by better than five percentage points in both Q1 and Q2. It's been more than two decades (Q4 1999) since that happened in even a single quarter. But with the median stock coming alive last month (moving from a YTD loss of 2.7% at the end of May to a YTD gain of 4.1% at the end of June) and running ahead of the index, there is evidence of broader participation and an improving risk environment. There is plenty of room to build on this recent improvement (e.g., the median stock exceeding its February peak), but last month's strength is a step in the right direction.