The stock market has performed tremendously well thus far in 2013. Overall, the S&P 500 Index (SPY) has risen by +29%. But when examining the composition of this rally, some notable facts quickly rise to the surface. First, such robust stock gains have not been supported by fundamentals at all this year with revenue and earnings both growing only in the low single digits. Perhaps more notably, the performance of the lowest quality companies in the S&P 500 Index has exceeded that of the highest quality companies by a wide margin. In other words, the incredible stock rally witnessed in 2013 has been primary driven not by quality, but instead by the most speculative companies in the market.
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