Global equities’ nearly decade-long bull run is stoking anxiety about its ability to power on, according to Richard Turnill, BlackRock’s global chief investment strategist. .
Turnill writes in BlackRock’s Weekly Market Commentary that one concern is “narrow breadth” — or, a fragile state when a small group of stocks is contributing the bulk of market returns, buoying the broader index.
“Today’s U.S. stock market appears to have little breadth — on the surface,” he writes. “The top 10 companies have accounted for 53% of the total return of the S&P 500 Index so far this year, versus 30% in 2017.”
However, according to Turnill, this says little about the remainder of the index constituents. The median stock’s earnings-per-share growth stands at 21%, versus a 20-year average of 0.2%.
“The median stock has delivered positive returns year to date, supported by strong earnings – suggesting a resilient market,” he writes.
In addition, Turnill points out that cross-sectional volatility — a measure of dispersion in returns across stocks — is near its lowest level in at least 20 years across most major regions, according to BlackRock’s Risk & Quantitative Analysis team. Turnill says this suggests most stocks are “marching in the same direction.”
Turnill sees today’s strong equity performance, especially in the U.S., as broad-based and driven by healthy fundamentals and solid earnings momentum.