One can be forgiven if “breadth” and “breath” are used interchangeably, although in the world of investing, the former represents depth of stock market participation, while the latter represents our lung capacity (and not much capacity for value investors so far this year). This year’s U.S. market returns can be characterized as possessing narrow breadth, as in outsized gains from a handful of stocks, namely mega-cap technology and consumer growth stocks, are driving the broader indices, many of which are market capitalization weighted.

This year’s narrow breadth has sucked the breath out of investment portfolios built on bedrock principles, such as diversification and price consciousness. Indeed, this year’s safe havens from a widely expected recession (based on economic consensus) are those companies with moat-like characteristics of solid profitability, inelastic customer demand, and exponential growth prospects, such as generative artificial intelligence that we first touched upon in our February 2023 Market Commentary.

By Benjamin M. Lavine, CFA, CAIA, RICP
Chief Investment Strategist, Freedom Advisors & Chief Investment Officer, 3D, a Freedom Advisors company