Q2 2024 – Annandale Capital Quarterly Commentary

What a bewildering market we’ve just witnessed. Daily, US equity indices climbed higher, yet a glance at a stock screen would have revealed few green tickers. Stock market breadth was abysmal, regardless of how you analyzed the data. Let’s break it down: Last quarter, the S&P 500 returned 4.3%. Remarkably, the five largest stocks (MSFT, AAPL, NVDA, AMZN, and GOOG) accounted for 93% of that move, while the top 10 stocks contributed 122%. In other words, if you owned the other 490 stocks, your return would have been -1.0%. The median S&P stock fell -2.6% last quarter. Small-cap stocks lost -3.3% and are now negative for the year. Less than 5% of S&P 500 stocks are testing new highs, and fewer than 25% are outperforming the index. This is truly an abnormal bull, frankly, a frustrating market. To many, this is an ominous sign. A stock market rally supported by only a handful of stocks suggests market fragility. While a major decline in the top five or ten stocks would likely drag the market down, there’s no rule stating that the excluded 90-95% of stocks can’t turn things around. To us, it simply is what it is: perplexing.

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