With the S&P 500 up over 1% in five of the last six trading days heading into Wednesday, we expected to see some strong breadth readings to go along with the gains, but in looking at the daily readings, since last week’s low, we were a little bit underwhelmed with the readings we saw.  Going back to 1990, on days when the S&P 500 was up 1% or more, the average daily advance/decline reading for the index has been +323, and since the lows of the Financial Crisis, the average has been even stronger at +373.  Furthermore, an average of one out of every four 1%+ daily gains for the S&P 500 since 1990 have qualified as ‘all-or-nothing’ days (when the net A/D reading for the S&P 500 is greater than +/- 400) while the percentage is 42% since the Financial Crisis low in March 2009.  Turning to the five 1%+ days the S&P 500 has had since last Monday, the daily net A/D readings have been +389, +329, +341, +199, and +226, for an average of just +297.  That average is modestly below the long-term average, but well below the post-financial crisis average.  Not only that but there hasn’t been a single all-or-nothing day since last Monday’s low.

The pace of all-or-nothing days for the S&P 500 hasn’t just been on the low side since the beginning of last week.  So far this year, there have only been two all-or-nothing days for the S&P 500 (2/25 and 3/2, both up days), which puts the pace for 2022 at just nine.  Normally, when we provide updates on the number of all-or-nothing days in the market, we qualify it with the fact that volatility in the market tends to come in bunches, so the pace of all-or-nothing days usually comes in fits and starts as well.  The only difference this time around is that we have already been in what has been a very volatile period for the markets, so if we aren’t getting all-or-nothing days now, how volatile will the market need to get before the pace starts to pick up?

The chart below shows the number of all-or-nothing days in the market by year going back to 1990.  While the pace of all-or-nothing days was very slow from 1990 through the early 2000s, once the Financial crisis arrived, the frequency really started to pick up and has stayed elevated ever since.  Since 2007, the average number of all-or-nothing days has been 32 per year, but at this year’s rate, the S&P 500 is on pace for just nine all-or-nothing days, which would be the lowest since 2017 and just the second year since 2006 that the total was in the single-digits.  Again, there’s still a lot of time left in 2022 for this pace to change, but at the current rate, 2022 is shaping up to be an outlier of a year.

Now that we’ve established that there have been such a low number of all-or-nothing days in the market, what are the implications?  One notable one is that with less correlation between individual stocks, there’s less of a tide lifting or sinking all ships environment in the market, and that puts an increased emphasis on stock picking relative to indexing.  Click here to view Bespoke’s premium membership options.

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