There's an interesting stat about the markets this week that emphasizes just how strong the most recent decline was. For the last 16 trading days, not a single S&P 500 stock hit a new 52-week high. Typically, there will be media reports daily on stocks that make new 52-week highs as a form of celebration, an indication of a stock's value, and a signal of future performance expectations. For the last 16 days, there's been silence on this matter, which leads us to wonder if there's a deeper significance to the recent stock market rout.
If you go back to 1990, you'll find that the second longest stretch of days where no stock in the S&P 500 hit new 52-week highs was 14 days. This week, we broke that record. So what does that mean?
First, it's a testament to the breadth and aggressiveness of the pullback that occurred from October through December. It also means that this pullback was widespread, which is sort of unique. Why would nearly every stock in the S&P 500 sell off? Some blame it on the index ETFs, which have become popular with the retail, DIY-investor. As they sold more and more, the Index funds followed suit to compensate. Given that the most popular Index ETF is S&P-focused, it's easy to see how this happened.
If markets weaken and investor concerns grow, there's always somewhere to put money. When investors get nervous about one area of the market, they tend to get excited about another. Out of all the sectors in the market, there's usually at least one oasis that shows promise. In this most recent case, there were no areas that offered that.
Just looking at one stat doesn't give you the sole or definitive reason for the market tumble, but it does demonstrate that the recent sell-off was no run-of-the-mill occurrence.