One of the major themes over the last couple of months has been the resurgence from growth and in particular mega cap growth. This has led the S&P 500 Index Funds group to find itself as the 5th ranked group out of the 135 groups tracked on the Asset Class Group Scores page.

One of the major themes over the last couple of months has been the resurgence from growth and in particular mega cap growth. This has led the S&P 500 Index Funds group to find itself as the 5th ranked group out of the 135 groups tracked on the Asset Class Group Scores page. Another way to view this is the US Equity Core Percentile Rank which sits at a hot 97.18%, its highest reading since February of 2020. A high core equity percentile rank conveys two major messages, the core equity market is in strong standing, and there just aren’t many other asset classes that offer more than the core US equity market. For longer-term investors, this is a market where you can lean on broad equity exposure with satellite exposure to diversify the portfolio.

For context, when the core ranks this high it can pose risk for a pullback. Examining the recent rankings on the Asset Class Groups scores page, the S&P 500 Index Funds group has improved, but much of the groups that ranked above it a month ago have deteriorated. So, while it may seem like the core equity market is excessively strong, the short-term shift in leadership from value to growth has played a large role in the S&P 500 Index Funds group having such a high ranking. Most of the groups that ranked above the S&P 500 Index Funds group a month ago were groups associated with value like Financials, Basic Materials, Industrials, Small Cap Blend, and Transportation. As we’ve seen these groups deteriorate while the core market maintains its strong positioning has created an environment where the core percentile rank is at elevated levels.

The core reading will likely not remain at this elevated level, but over the last year, the core equity percentile rank has remained around the 90th percentile with the 10% of asset classes ranked above it seeing a couple of rotations. We seem to be in the middle of yet another growth/value rotation and the core keeps chugging along. This is why when there’s a strong S&P 500 Index, it is beneficial, especially for longer-term investors, to build their portfolios around the core equity market with satellite strategies surrounding it. As long as the core is strong, it’s best not to fight it and even better to take advantage.