Starting breadth had little relationship with average subsequent returns. Lower breadth was associated with a wider distribution of 12-month outcomes, while relationships with realized volatility and drawdown were less stable.
Research · Data through 2026-08-31
Breadth measures participation across index constituents. This study uses the share of S&P 500 constituents above their 40-week moving average, approximately 200 trading days.
The calculation uses 40 weekly observations rather than 200 daily observations.
The sample contains 360 month-end observations from 1996-09-30 through 2026-08-31. Of those, 347 have a complete subsequent 12-month return window.
Constituent membership is based on Bloomberg quarterly S&P 500 membership snapshots carried forward between observation dates. Median constituent coverage is 99.6%, with a minimum of 99.4%.
The full-sample average breadth reading is 62.2%. Selected lows include 10.4% in July 2002, 3.2% in February 2009, 6.1% in March 2020, and 12.0% in September 2022.
360 month-ends, 1996-09-30 to 2026-08-31. The reading at 2026-08-31 is 67.5%, the 54th percentile of its own history, +11.4 points over three months.
Each month is assigned to a quintile based on its starting breadth reading.
| Starting breadth | Mean reading | Forward 3m mean | Forward 12m mean | Forward 12m median | Positive 12m |
|---|---|---|---|---|---|
| Q1 lowest | 29.4% | 3.47% | 11.68% | 16.0% | 71.4% |
| Q2 | 54.1% | 2.28% | 7.55% | 12.81% | 71.0% |
| Q3 | 65.5% | 1.69% | 12.59% | 14.62% | 81.4% |
| Q4 | 75.4% | 3.23% | 11.37% | 13.2% | 88.2% |
| Q5 highest | 86.8% | 2.86% | 12.02% | 13.37% | 87.1% |
| All months | 2.7% | 11.05% | 13.74% | 79.8% |
Starting breadth did not consistently order subsequent average returns.
The lowest-breadth quintile was followed by an average 12-month return of 11.68%, compared with 12.02% for the highest-breadth quintile.
Q2 had the lowest average 12-month return at 7.55%. Q3 had the highest at 12.59%.
The 3-month results were also unordered. Average returns ranged from 1.69% to 3.47% across the five quintiles.
Mean S&P 500 total return over the following 3 and 12 months, by the quintile of the breadth reading at the start of the month. The 12-month means span 5.04 percentage points across the five buckets and do not order with breadth. Lowest quintile 11.68% over 12 months, highest 12.02%, weakest the second at 7.55%.
The prior 3-month change in breadth produced a similar result. Months with the largest decline in breadth were followed by an average 12-month return of 12.31%. Months with the largest increase were followed by 13.27%.
The middle change quintile returned 9.03%. Neither the level of breadth nor its prior 3-month change consistently ordered average subsequent returns.
The percentage of positive 12-month periods was higher in the upper breadth groups. It was 71.4% in Q1 and 87.1% in Q5.
That progression was not monotonic. Q1 and Q2 were nearly identical, and Q5 was slightly below Q4.
A clearer relationship appears in the dispersion of subsequent 12-month returns.
| Starting breadth | Forward 12m standard deviation | Q25 | Q75 | Minimum | Maximum |
|---|---|---|---|---|---|
| Q1 lowest | 24.61 | -5.99% | 29.52% | -43.42% | 56.23% |
| Q2 | 18.72 | -7.82% | 20.39% | -36.06% | 41.03% |
| Q3 | 14.76 | 4.22% | 22.23% | -18.18% | 48.21% |
| Q4 | 11.35 | 6.29% | 17.79% | -24.74% | 34.86% |
| Q5 highest | 9.32 | 6.31% | 18.06% | -11.24% | 30.08% |
Every monthly observation from 1996 to 2026, grouped by the breadth quintile it started in. After the lowest-breadth months the outcome fell anywhere between -43.4% and 56.2%; after the highest-breadth months between -11.2% and 30.1%. Overlapping windows — see Robustness.
The standard deviation of subsequent 12-month returns declined at each step from 24.61 percentage points in Q1 to 9.32 in Q5.
The middle 50% of Q1 outcomes ranged from -5.99% to 29.52%. In Q5, the range was 6.31% to 18.06%.
The full observed range was also wider following low breadth. Q1 outcomes ranged from -43.42% to 56.23%, compared with -11.24% to 30.08% in Q5.
A 12-month moving-block bootstrap with 10,000 resamples estimates the Q1-minus-Q5 dispersion difference at 13.58 percentage points, with a 95% interval of 5.51 to 20.96.
The corresponding dispersion ratio is 2.479×, with a 95% interval of 1.545× to 3.798×.
The spread narrows at every step from the lowest quintile to the highest. A moving-block bootstrap (10,000 resamples, 12-month blocks) puts the Q1-minus-Q5 difference at 13.58 points, 95% interval 5.51 to 20.96.
These statistics describe the distribution of ending 12-month returns. They do not measure the volatility or drawdown experienced within each 12-month period.
Risk within each subsequent 12-month window was measured from daily returns.
| Starting breadth | Realized volatility (annualised) | Maximum drawdown | Worst 3m within the window |
|---|---|---|---|
| Q1 lowest | 22.43% | -19.25% | -12.95% |
| Q2 | 17.96% | -17.04% | -11.96% |
| Q3 | 16.22% | -14.02% | -10.32% |
| Q4 | 16.22% | -13.52% | -10.66% |
| Q5 highest | 15.41% | -12.24% | -9.15% |
Both measures come from daily bars inside the forward window rather than from its endpoint. Drawdown deepens at every step as breadth falls, and its bootstrap interval clears zero (0.10 to 11.66). Volatility is higher after low breadth but does not order across the middle quintiles, and its interval contains zero (-0.62 to 8.14).
Average maximum drawdown improved monotonically across the five breadth quintiles. It was -19.25% in Q1 and -12.24% in Q5.
The bootstrap estimate of the Q1-minus-Q5 drawdown difference is 6.59 percentage points, with a 95% interval of 0.10 to 11.66. The lower bound is close to zero.
Realized volatility was 22.43% after Q1 readings and 15.41% after Q5 readings. The middle quintiles were not monotonic.
The bootstrap interval for the volatility difference is -0.62 to 8.14 percentage points. It includes zero. The estimated probability that Q1 volatility exceeds Q5 volatility is 0.94.
The evidence for 12-month return dispersion is therefore stronger than the evidence for realized volatility or drawdown.
Expanding-window quintiles. Quintile boundaries were re-estimated using only breadth observations available through each month, with a minimum history of 120 months.
Across the resulting 228 observations, 12-month return dispersion was 26.72, 16.81, 12.36, 10.35, and 10.02 from Q1 through Q5.
Average subsequent returns remained unordered. They ranged from 11.99% in Q1 to 11.11% in Q5, with Q3 highest at 14.68%.
Non-overlapping observations. Using December month-ends only produces 29 observations, or five to six observations per quintile.
Q1 dispersion was 26.90, compared with 9.44 for Q5. The five groups were no longer monotonic because Q3, at 21.88, exceeded Q2, at 18.37.
The small number of observations limits what can be inferred from this check.
Sample halves. Splitting the sample at 2011-03-31 materially changes the strength of the results.
In the first half, 12-month return dispersion by quintile was 27.43, 19.56, 19.16, 13.12, and 8.53.
In the second half, it was 14.16, 12.11, 12.07, 9.15, and 10.50. The Q1-to-Q5 difference remained, but the monotonic ordering weakened.
The same calculation as above, run separately on the first and second 180 months. The ordering is much steeper in the first half (27.4 down to 8.5) than in the second (14.2 down to 10.5), and in the second half the highest quintile is no longer the narrowest.
The drawdown relationship did not persist in the second half.
First-half average maximum drawdowns were -23.23%, -22.58%, -14.81%, -13.35%, and -12.90% from Q1 through Q5.
Second-half values were -12.68%, -12.92%, -13.86%, -13.97%, and -11.77%.
There is no relationship between starting breadth and subsequent drawdown in the last fifteen years.
Every observation with a complete 12-month forward window ends before the 2025-12-26 transition from Bloomberg to EODHD pricing. The vendor transition therefore does not affect the 12-month results reported here.
The transition also cannot yet be evaluated for this horizon because a complete post-transition 12-month window is not available.
Breadth was 67.5% on 2026-08-31. That is the 54th percentile of the 360-month history, compared with a full-sample average of 62.2%.
The reading increased 11.4 percentage points over three months and was 1.8 points below its level one year earlier.
A 67.5% reading falls in Q3. The average breadth reading for that quintile is 65.5%.
Historically, Q3 observations were followed by an average 12-month return of 12.59% and a 12-month return standard deviation of 14.76 percentage points.
Average realized volatility during those windows was 16.22%. Average maximum drawdown was -14.02%.
These are historical conditional statistics. They are not a forecast of the return or risk following the current reading.
The level of S&P 500 breadth did not consistently order subsequent average returns over either the 3-month or 12-month horizon.
The clearest full-sample relationship was with the dispersion of subsequent 12-month returns. Dispersion declined monotonically from the lowest breadth quintile to the highest, and the bootstrap interval for the Q1-minus-Q5 difference excluded zero.
The dispersion relationship was weaker in the second half of the sample but remained wider in Q1 than Q5.
Maximum drawdown also improved monotonically across breadth quintiles in the full sample. That relationship was concentrated in the first half and was absent in the last fifteen years.
Realized volatility was higher after low-breadth observations, but the relationship was not monotonic and its bootstrap interval included zero.
This study does not test why these relationships occur. It does not establish that the dispersion relationship will persist out of sample or that it can be converted into an investable rule.
The analysis covers one index, one breadth definition, and the horizons reported here. No position rule or strategy is tested.
This study was initiated after a discrepancy appeared in the live breadth measure. The live reading fell from 59.2% to 26.2% across five sessions while the index increased 0.87%.
The live price store is intended to contain one bar per week. Daily bars had begun accumulating in that store.
Because the moving averages were defined by bar count, the 40-bar and 10-bar calculations were being applied to a much shorter period than intended.
The historical research series used in this study is independent of that live measure. It is reconstructed from adjusted-close files and does not reference the live measures store.
The analysis checks this separation on each run and stops if the condition is not met.
Universe. S&P 500 constituents at each month-end from Bloomberg quarterly membership snapshots. Membership is carried forward between snapshots. The monthly universe ranges from 499 to 517 constituents.
Breadth. Percentage of constituents whose latest close exceeds the mean of their trailing 40 weekly closes, approximately 200 trading days. Percentages use constituents with a valid observation.
Prices. Chained adjusted closes using Bloomberg total-return history through 2025-12-26 and EODHD thereafter.
Returns. S&P 500 total return is represented by SPY from each month-end.
Risk. Realized volatility is the annualised standard deviation of daily returns within the subsequent window. Maximum drawdown is the deepest peak-to-trough decline within the window. Worst 3-month return is the minimum 63-trading-day return within the window.
Quintiles. Primary results use quintiles formed from the full sample. The expanding-window robustness check estimates boundaries using only observations available through each date.
Bootstrap. Circular moving-block bootstrap using 12-month blocks and 10,000 resamples. Quintile boundaries are re-estimated within each resample.
Limitations. The 12-month forward windows overlap, so monthly observations are not independent. The moving-block bootstrap and non-overlapping annual sample address this in different ways.
The historical research series uses a total-return basis and is not continuous with the price-return basis displayed on the live breadth surface. Full-sample quintile boundaries are descriptive and use information from the complete sample.
The realized-volatility and drawdown relationships are not stable across sample halves.
AI assistance. This publication is produced with interactive assistance from large language models, including analysis and drafting. TrendToWealth defines the methodology and editorial requirements and reviews numerical claims against the underlying data and sources before publication.
2026-09 — Initial publication. Sample through 2026-08-31. Methodology version 2.0.
Next expected refresh: semiannual. Conclusions are compared with the previous generated payload on every refresh. A material change requires editorial review before publication.
Data from 1996-09-30 to 2026-08-31, using month-end values. Updated semiannual.