September Market Review: Weak Breadth, Tech Leadership & Credit Spreads
September was a very narrow market.
The S&P 500 finished roughly flat, but that really doesn’t tell the story underneath the surface.
Technology was by far the strongest sector, while almost everything else struggled. Market breadth remained very weak, the average stock continued to lag, and mega-cap technology, semiconductors, and the AI trade did most of the heavy lifting.
In this month-end market review, I spend some time on whether that lack of breadth should be viewed as a major warning sign.
My answer, at least for now, is not necessarily.
The S&P 500 is market-cap weighted, and we’ve seen periods going back years where a small group of very large stocks can continue pulling the indexes higher even while the average stock struggles.
What I’m watching more closely is what’s happening between stocks, bonds, commodities, and credit markets.
I go back through the tech bubble, the financial crisis, the 2011 European debt crisis, and the 2022 bear market to look at the order in which bond yields, credit spreads, stocks, and commodities began to turn.
That brings us to today.
Breadth is terrible, but the Nasdaq is still outperforming the S&P, high beta is outperforming low volatility, and the major growth areas are still showing leadership.
The one thing that does have my attention is the recent widening in credit spreads.
For now, I’m sticking with relative strength, risk management, and the parts of the market that continue to work.
As always, the ETFs, indexes, securities, and strategies discussed in this video are for illustrative and educational purposes only and do not constitute a recommendation to buy or sell any security. Please refer to the disclosures at the beginning and end of the video.
Matt Williams, CFP®
JTM Williams Capital Management
matt@jtmwilliams.com
703-782-3110
jtmwilliams.com