When evaluating the stock market, many investors rely on the mainstream barometers such as the S&P 500 and Dow Jones index. But simply looking at these indices only gives you a limited overview of the overall market. There are other to consider, such as market breadth, bond yields and investor sentiment.
If you’re looking to get a better big-picture view of the stock market, consider the following three charts.
Market Breadth: This is the ratio of advancing stocks to declining stocks. The ratio should be more than 1 for a healthy market. The chart below shows the advancing/declining stocks ratio over the past couple of years.
Source: https://godzillanewz.com/the-stock-market-in-3-charts-market-breadth-bonds-sentiment/
As you can see, the ratio has generally been trending upwards since the market bottomed out in 2018, suggesting a healthy, expanding market.
Bond Yields: Bond yields are a good indicator of overall market sentiment, with higher yields normally indicating rising demand and a healthier economy. The chart below shows the 10-year bond yields over the past couple of years.
Source: https://godzillanewz.com/the-stock-market-in-3-charts-market-breadth-bonds-sentiment/
As you can see, the 10-year bond yields have risen consistently since the start of 2018, indicating a growing confidence in the economy.
Investor Sentiment: Last but not least, investor sentiment is another useful indicator of market health. The chart below shows the University of Michigan’s consumer sentiment index over the past couple of years
Source: https://godzillanewz.com/the-stock-market-in-3-charts-market-breadth-bonds-sentiment/
As you can see from the chart, consumer sentiment has been on an uptrend since the start of 2018, suggesting a positive outlook amongst investors.
By looking at these three charts, you can get a better big-picture view of the stock market. Market breadth, bond yields and investor sentiment are all helpful indicators of market health. If you’re looking to get an overall sense of where the market is headed, keep an eye on these three metrics.