Why the Market’s Breadth Might Mean a Downdraft After All

Wide dispersion in stock sectors suggests a slide ahead, says Sam Stovall, citing market history.


Looking for a bearish rationale? Try the market’s latest pattern: Its breadth has widened. And when that happens, stocks don’t do well.

The current dispersion in the S&P 500 is rather wide. Sam Stovall, CFRA’s chief investment strategist, likens it to “a school of fish.” That is, all over the place. Thus far this year, the leading sector, energy, is up 34.4%, according to Yardeni Research. Meanwhile, the laggard is perennial plodder utilities at 3.3%. That’s quite a gap between them.

The market displays staying power when a high percentage of sectors, sub-industries, and stocks are pulling upward together, Stovall wrote in a note. Yet, like the safety offered by a tight school of fish, the S&P 500 has also performed better when the difference between the best and worst performing sectors has been narrow, rather than wide, he observed.

The current dispersion “is uncomfortably wide,” he added. Since 1990, the average difference between the best and worst performing sectors on a trailing nine-month basis has been roughly 36 percentage points. Today, that difference is almost 80 points, or more than two standard deviations above the average.

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During previous incidents of such extremes, the S&P 500 fell an average of about 3% in the following nine months, compared with the average rise of 7.2% for all nine-month periods. It climbed in price only 35% of the time, versus the more normal 79%. In Stovall’s view, “Though no guarantee of an impending decline, today’s wide sector berth points to an increased likelihood of underperformance, relative to its own average return.”

Just a 30 days ago, Stovall thought that this broad breadth was a good thing. But that was when it appeared that many sectors were climbing at once, displacing the 2020 hegemony of the Big Tech stocks. Trouble is that, despite a continued market rise since then, the advances weren’t huge. The S&P 500 increased 3% since June 15, but the sectors were bunched together—thus far in July, they’ve ranged from a high of consumer discretionary at 3% to energy at minus 2%, by Yardeni’s reckoning.

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Chicago Teachers’ Pension Fund Names Carlton Lenoir Sr. Executive Director

He leaves the Illinois Teachers’ Retirement System to replace Charles Burbridge, who departed last year.

Carlton Lenoir Sr.

Carlton Lenoir Sr. has been named executive director of the Chicago Teachers’ Pension Fund (CTPF), effective Aug. 2. He rejoins the pension fund from the Illinois Teachers’ Retirement System, where has was the chief benefits officer for the past five years. 

Early in his career, Lenoir was a benefits manager at CTPF, where he worked for four years before moving on to the Employees’ Retirement System of Georgia (ERSGA). He was at the Georgia fund for nearly 11 years, working his way up from director, financial management, to chief financial officer (CFO) to deputy executive director. He then moved on to the Illinois Teachers’ Retirement System in 2016.

“The trustees are pleased to welcome Mr. Lenoir back to the fund,” CTPF Board of Trustees President Jeffery Blackwell said in a statement. “His senior level financial experience coupled with his institutional knowledge, operational expertise, strategic background, and collaborative style will serve the fund well.”

Lenoir earned a bachelor of business administration degree from American Intercontinental University and a juris doctor degree from John Marshall Law School.

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“I have always had a desire to serve the public school system,” Lenoir said in a statement. “I deeply understand and appreciate the need to protect and enhance the future economic well-being of members and beneficiaries through best practices in management, investments, and member services.”

The CTPF hired EFL Associates to launch a national search for a permanent executive director after former Executive Director Charles Burbridge left in October. Blackwell has been serving as interim executive director since March, after deputy executive director Mary Cavallaro retired in January.  

In a CTPF board meeting last August, Blackwell, who is the first African American male president of the CTPF’s board of trustees, chastised the fund for breeding a “culture of blatant racism and sexism.”

“For the last year and a half, I have been witness to some of the most abhorrent, disturbing, and despicable actions by former and current trustees on this board,” Blackwell said at the board meeting. “My silence will no longer be used as complicity to enable unethical and terrible behavior from trustees.” 

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