Market Insider

US markets: Stock pickers are the real winners right now

The broader S&P 500 index is trading in record territory Monday, but the real winners are the investors who have picked the right stocks along the way.

Between the index's last closing high in May 2015 and Friday, more than two-thirds of the stocks in the S&P 500 have either gained 10 percent — or lost that much, according to Howard Silverblatt of S&P Dow Jones Indices. More than 40 percent of the S&P 500 has seen moves of 20 percent or more.

Utilities, telecoms and consumer staples, the so-called "defensive" sectors, are up more than 10 percent between that last record close and Friday's close, Silverblatt said, while energy is down more than 10 percent in that period.

Isu | Getty Images

"Definitely this is a stock picker's market," he said. "The index does offer safety up and down. Obviously you can do a lot better."

The S&P 500 hit an all-time intraday high Monday, led by gains in tech stocks. The last intraday high of 2,134.72 was touched May 20, 2015, and the last closing high was set the next day at 2,130.82. The bull market celebrated its seventh birthday in March and is the second-longest in history.

"Typically as you get toward the later innings, … leadership starts to narrow," said Daniel Deming, managing director at asset management firm KKM Financial.

In the Dow Jones industrial average, 16 of the 30 component stocks are up at least 10 percent between its closing high of 18,312.39 set May 19, 2015, and Friday, according to Silverblatt. McDonald's is the only Dow component up more than 20 percent over that time, while Goldman Sachs, Apple and American Express are the worst performers with losses of more than 20 percent each in that period.

The sharp divergence in performance shows that being in the right sectors is increasingly important, especially as the broader market swings with global news.

"As long as the U.S. economy doesn't show some great risk here, I think you'll see rotation in different issues as people deal with different economic concerns as the market grinds higher," said David Kelly, chief global strategist at JPMorgan Funds.

You've got that buying pressure to support. The market still doesn't know the true economic impact of what happened in Europe.
Daniel Deming
managing director, KKM Financial

The S&P 500 dropped more than 10 percent from its 52-week intraday high, into correction territory, last August and early this year on concerns of negative spillover from a slowdown in China's economy. After the surprise U.K. vote to leave the European Union on June 23, the S&P declined more than 5.5 percent over the next two days, but more than recovered those losses in the two weeks since.

It's a "very unique kind of dynamic," Deming said. "As interest rates continue to get pushed lower … it just continues to force assets into what are perceived as higher-risk areas."

"You've got that buying pressure to support," he said. "The market still doesn't know the true economic impact of what happened in Europe."

On Monday, global stock indexes rallied following national elections in Japan that will keep pro-stimulus Prime Minister Shinzo Abe in power. Other tailwinds included an emerging clearer picture of the United Kingdom's post-Brexit leadership muddle and the strong June U.S. jobs figure released Friday. Treasury yields edged higher Monday, but the long end remained near recent record lows. Gold was little changed.

The S&P 500 also could be pushed higher — or lower — as earnings season picks up, with major financial firms reporting later this week and tech names in the next two weeks.

Katie Stockton, chief technical strategist at BTIG, said in a note that the S&P 500 has risen above the psychologically key 2,100 level 25 times in history and has not stayed above that level for more than 14 straight trading days.

"We find this concerning, with sentiment overly complacent by some measures," she said, adding she is waiting for consecutive Friday closes above the prior record to determine a "decisive breakout."