GREAT EXPECTATIONS: CONVERGENCE AND DIVERGENCE IN STOCK PLAYGROUNDS © Leo Haviland August 14, 2021
In Charles Dickens’s “Great Expectations” (Chapter 2), a character says: “Ask no questions, and you’ll be told no lies.”
STOCKS: THE EMERGENCE OF SOME NOTABLE DIVERGENCE
In first quarter 2020, prices for an array of stock marketplaces cratered at approximately the same time as the S+P 500. They thereafter reached a major bottom “together” in late March 2020. Over subsequent months, magnificent bull moves occurred.
However, since around early mid-February 2021, prices for the S+P 500, European stock indices in general, and broad international benchmarks (including American stocks and those of other countries), have diverged from emerging stock marketplaces in general, China’s Shanghai Composite Index, and Japan’s Nikkei signpost.
Some important and widely-watched American large capitalization stocks have retreated fairly significantly in recent months despite the S+P 500’s onward march to new highs. If more marketplace leaders within the large capitalization stock fraternity (especially American ones) begin to decline, the greater the odds of price convergence between that group (picture the S+P 500) and small cap stocks (in the US and elsewhere), emerging marketplace stock realms (including China), and Japanese equities
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Great Expectations- Convergence and Divergence in Stock Playgrounds (8-14-21)