The NYSE Composite is a stock market index covering all common stock listed on the New York Stock Exchange, including American depositary receipts, real estate investment trusts, tracking stocks, and foreign listings. Over 2,000 stocks are covered in the index, of which over 1,600 are from United States corporations and over 360 are foreign listings.
This is a broader view of what is going on in the stock market, as compared to the 30 stocks that make up the $DJIA or even the 500 in the S&P 500 $SPX.
Let’s take a look at what has been going on under the hood over the past 20 years!
In the mid to late 90’s, the stocks that looked like the S&P 500, or were in the S&P 500, persistently outperformed the NYSE Composite, so there was a shorter list of stocks that were working to drive the market to new highs!
As the Tech bubble burst, money moved back into secondaries and markets were able to climb to highs again, but this time on the heels of more participants. This action continued into the Financial Crisis.
Since the bottom in 2009, it has paid handsomely to look like the S&P 500, which is indicated by the blue highlighted portion of the chart, vs. the larger part of the market.
Our take-away here is this:
1) Understand where the relative strength is.
2) Focus on what’s driving it under the hood.
3) It would be hard for your Money Manager(s) that operate outside the S&P 500 to deliver in the latest bull market.
4. Sometimes things are not what they appear! If you are long stocks, continue to focus on stocks from the S&P 500 inventory.