When John Roque looks at the “markets,” what he sees is very different from that which most observers might deduce. While the health of the economy is often benchmarked by a rising stock market, Roque, a former technical market analyst for George Soros and now fund manager at Key Square Capital Management, sees bifurcation. What is behind the stock market advances is not a broad-based indication of overall business health, but rather the wealth effect that is showered on a few select stocks at the top.

Roque: In a world dominated by passive investing, focus on the top stocks in an index

In an era benchmarked by talk of bubbles – bitcoin, central bank stimulus, and negative interest rates – Roque continues to give the “market” the benefit of the doubt. But increasingly that “market” is reflective of a world in which a very select few are prosperous to a significant degree, while the majority of stocks are languishing in mediocrity.

In a relatively rare occurrence through history, the performance of the top ten stocks in global stock market indexes is significantly driving the performance of the index.

In Spain the top 10 stocks account for 70% of the index performance; on the Nasdaq 100, 10 stocks account for 57% of the index’s gain; In Germany its 62% and in Hong Kong on the Hang Sang the top ten stocks account for 68% of performance.

The “market” isn’t about a broad base of stocks, but rather a select few at the top. “If you have an idea of what these top 10 stocks are doing, you have an idea of what the ‘market’ is doing,” Rogue said on the Financial Sense podcast.

John Roque: Understand the price performance of the top stocks to understand the “market”

To understand the “market” is not to gauge the overall health of business throughout a sovereign region, but rather it is about understanding what is driving the elite stocks. It is with this focus that Roque looks at delivering returns.

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