Just How Narrow is This Market? Two Visualizations to Illustrate the Importance of Good Active Management

Most stocks are down since the global equity markets peaked on 5/21/2015 (this goes without saying) and most stocks are down a lot. This puts a premium on solid active management and stock picking. But the sheer numbers are striking.

Of the 2885 companies in our GKCI All Country World Index, fully 2383 (or 83%) of them are down since the 5/21/2015 high, leaving only 502 (or 17%) of  stocks up since that date. A stock-pickers market if we ever saw one! The first chart below illustrates this blunt point.

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As we dig into the details, however, we see just how hard it’s been to stay above water since the May 21, 2015 peak in the global equity markets. Below we show a histogram of the distribution of stock returns since the 5/21 high. Mostly what you see is red (negative returns) and within that group you see an incredible amount of dark red between the bars that read -18% through -54%. That is to say, most stocks that are down are down between 18-54%! In other words, there are landmines everywhere, and index tracking active mutual funds and ETFs have hit them all. 

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