The global stock market looks more like the bull market of 2020 than the bearish landscape of 2000 or 2021, research firm says

• Stocks resemble the bull market of 2020 more than the bearish landscapes of 2000 or 2021, NDR said.
• Stocks are seeing reduced concentration and wider breadth to start 2024.
• Technical indicators suggest improvement in global participation, NDR said. 

Global stocks look to be in a good position this year even as the first two weeks have been lukewarm for investors.

That’s according to Ned Davis Research, which points to bullish signals including healthy consolidation, improved participation in market upswings, and waning concentration of stock market winners. 

In a January 11 note, the firm’s chief global investment strategist, Tim Hayes, said that reduced concentration resembles the bull market of late 2020, not the bearish landscapes of early 2000 or late 2021.  

In particular, Hayes pointed out that among the 47 All Country Wide Index (ACWI) component markets, 92% are above their 50-day moving averages, hovering near the highest level since January 2021. 

“Among the smoothings themselves, 89% are rising, the highest percentage since March of that year,” he said. “And not since the subsequent May have we seen such a high percentage of markets above their 200-day smoothings, currently at 87%.”

The concentration in mega-cap stocks within that index hit new highs in September but has since receded.

And since concentration has dipped in that time, NDR’s aggregate of Rally Watch indicator has climbed above 50%, which it similarly did in 2020. 

“We noted in the September report that the aggregate rose above 50% after concentration peaked and declined in 2020 but failed to do so after the concentration peaks of 2000 and 2021,” Hayes said.

Among this batch of indicators, according to NDR, when all three composites have been positive at the same time, which they have been since December, the ACWI has averaged 20% gains per year since 1985. 

There were 28 previous occasions when each indicator was positive for at least 15 days, and the ACWI climbed 4% on average, and secured gains in 79% of the cases.

The last two cases, NDR said, both took place in the second half of 2020. 

“The message from our indicators is that there’s now little risk of a megacap meltdown that would weigh down the rest of the market and launch a bear market reminiscent of 2000 or 2022,” the strategist maintained.

“Instead what we’re seeing is reduced megacap dominance and increased participation, similar to late 2020. Now as then, the prospects are good for record highs and ongoing strength in the ACWI and a growing contingent of component markets.”