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Alternative Market Briefing

Comment: Equity strength in numbers

Thursday, June 01, 2017

Matthias Knab, Opalesque:

BlackRock writes on Harvest Exchange:

Many investors are questioning whether the global stock market rally can last, after several indexes repeatedly hit record highs. We see further gains ahead, albeit more muted, as the rally is increasingly broad-based, backed by strong earnings momentum and a global reflationary backdrop.

[See chart on Harvest - see Source link below]

We believe the rally is built on the strength of the broad market, rather than just an individual sector. The chart above shows the contribution from the best-performing sector to the broad annual return of the MSCI ACWI Index each year from 1995. The technology sector has contributed about a third of the index's return so far this year-near the long-term average for the contribution from the top-performing sector during the period.

More than a handful of stocks

We are seeing greater breadth in major equity markets, with Europe and emerging markets (EM) now playing catch-up to the eight-year U.S. bull market. High stock market breadth gives us confidence in the sustainability of gains. The proportion of individual shares in several major indexes trading above their 250-day moving average has hit a two-year high. In Europe and Japan, this proportion is above 80%.

Tech has provided a big lift to U.S. and EM stocks, but market strength goes ......................

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