woman watching subway passMarket consolidation happens. The market is flat.

That’s right. It’s a rare occurrence – something that has happened just 12 times since 1926, according to Fortune – but the Standard & Poor’s 500 Index (S&P 500) has remained in a narrow trading range for seven months. This is a very long period of market consolidation and churn. For every sector that has delivered performance gains (for instance, healthcare, software, and consumer discretionary), there has been one with losses that have offset those gains (for instance, energy, materials, and industrials).

The S&P 500’s unremarkable gains year-to-date are owed to just a handful of stocks, which Barron’s said means the market has bad breadth. That’s not a good sign, but it’s not a bad sign, either. Less breadth doesn’t always signal the end of a bull market:

“Big downturns are almost always preceded by a lack of breadth, which is one reason some folks are preparing for the end. There’s only one problem: Declining breadth doesn’t always signal the end of a bull market. From September 4 to October 13 of last year, the S&P 500 outperformed the equal-weighted version of the index by more than 1.5 percentage points [a measure indicating lack of breadth], leading to similar calls that it was time to bail. The S&P 500 gained 8.5 percent during the next three months.”

Fortune’s analyst reviewed the historical data for the dozen years that offered similar market performance during the first seven months of the year and found that a range of outcomes is possible. The S&P 500 Index could:

  • Remain relatively flat: It happened in 1994.
  • Deliver a loss over the full year: It happened in 1930, 1941, and 1990.
  • Deliver a gain over the full year: It happened during the remaining eight years.

The median return for the twelve years was 6 percent.

Reading stock market tea leaves is no easy task. That’s why it’s important to remain focused on your financial goals and the strategies you’ve selected to help pursue them.

Data as of 7/31/15







Standard & Poor’s 500 (Domestic Stocks)







Dow Jones Global ex-U.S.







10-year Treasury Note (Yield Only)







Gold (per ounce)







Bloomberg Commodity Index







DJ Equity All REIT Total Return Index







S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.  You cannot invest directly in this index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* “Market Consolidation”