Lately, the higher the Standard & Poor’s 500 Index goes, the less investors care.

About 1.8 billion shares traded each day in S&P 500 companies last month, the fewest since 2008, according to data compiled by Bloomberg. When the gauge hit an all-time high on May 23, only about 20 of its 500 companies reached 52-week highs, the data show. That’s the lowest number in a year.

When volume and breadth wane even as stocks surge, it’s a warning sign that has preceded losses in the past, according to Sundial Capital Research Inc. in Blaine, Minnesota. Hayes Miller, who helps oversee $57 billion at Baring Asset Management Inc., says the skepticism shows investors distrust a rally built on Federal Reserve stimulus.

“Breadth is suggesting that the market is topping,” Miller, the Boston-based head of multi-asset allocation for Baring, said in a May 28 telephone interview. “This is not a good starting point for buying equities at this price. We all know that investors are induced into risk assets by central bank policies, which keep your safer options very unattractive.”

Exchange-traded and mutual funds that buy U.S. shares saw $1.2 billion in outflows this quarter, while bonds received $34 billion, data compiled by Bloomberg and the Investment Company Institute show. The gap is poised to be the largest since September 2012.

Stock Outflows

Individuals investing through the funds only started buying stocks in 2013 after the S&P 500 more than doubled from its 2009 low. They added more than $150 billion to funds last year after withdrawing $260 billion in the previous four, data compiled by ICI and Bloomberg show.

“Over the past couple of months we’ve seen an increase of flows out of stocks and back to bonds, which has been a surprise,” Cameron Hinds, the Lincoln, Nebraska-based regional chief investment officer for Wells Fargo Private Bank, which has about $170 billion under management, said in a May 29 phone interview. “We’ve also been surprised by the degree to which the yield on the 10-year Treasury note has drifted lower.”

The benchmark U.S. 10-year note saw its yield drop to 2.44 percent last week, the lowest in 11 months. The S&P 500, rose 2.1 percent to 1,923.57 last month, extending its gain since December to 4.1 percent.

At an investor conference last week, Goldman Sachs Group Inc. President Gary Cohn blamed the reduction in trading on calm markets and the Fed’s efforts to hold down interest rates.

Falling Volatility

Volatility on the MSCI All-Country World Index, which tracks stocks in both developed and emerging markets, dropped to 5.33 on May 28, its lowest level since 1996, according to 30-day historical data compiled by Bloomberg. The Chicago Board Options Exchange’s Volatility Index, known as the VIX, closed below 12 for the five previous days, the longest streak since 2007. The measure has a five-year average of 19.9.

“What drives activity in our business is volatility,” Cohn said in New York on May 28. “If markets never move or don’t move, our clients really don’t need to transact.”

Citigroup Inc. Chief Financial Officer John Gerspach said last week that second-quarter trading revenue could fall as much as 25 percent from year-earlier levels, and JPMorgan Chase & Co. estimated a 20 percent drop.

John Traynor, chief investment officer of People’s United Bank Wealth Management in Bridgeport, Connecticut, finds improving economic growth and earnings more important than volume. His firm oversees $5.2 billion.

Economic Surprises

Citigroup’s U.S. Economic Surprise Index, which rises when data exceed forecasts, has gained 90 percent since reaching an almost two-year low on April 7. At the same time, about 74 percent of S&P 500 companies that have reported results this season beat analysts’ estimates for profit, while 53 percent exceeded sales projections, data compiled by Bloomberg show.

“Stocks are up because earnings are up,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees $376 billion, said in a May 28 interview. “And there’s no fundamental indication that the wheels are coming off.”

Laszlo Birinyi, the founder of Birinyi Associates Inc. and one of the first investors to buy when stocks were bottoming after the 2008 financial crisis, is also skeptical of the idea stocks valuations will falter amid low market breadth. Concern that the S&P 500’s recent records have not been accompanied by a large number of stocks reaching fresh 52-week highs is unwarranted, he wrote in a May 27 report.

Value Traded

Record prices may contribute to a drop in the number of shares changing hands because it takes more money to buy the same amount of stock. A daily average of $26 billion of S&P 500 companies were traded in May, down from $32 billion in April and about the same as last year, according to data compiled by Bloomberg.

Skepticism toward U.S. equities has extended from individuals to institutions. Global money managers raised cash holdings to a two-year high in May and said America is the worst place to invest, a Bank of America Corp. survey found last month.

With everyone pulling out, trading in S&P 500 stocks slipped to an average of 1.8 billion shares a day last month, the lowest since before the bull market began in March 2009. That compares with 2.7 billion a day in 2012.

‘Efficient’ Market

“Volume makes the market more efficient and liquid,” Terry Morris, a senior equity manager who helps oversee about $2.8 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said in a May 28 phone interview. In a thin market “you can have a handful of companies that can mask the broad direction of the rest of the S&P’s members,” he said.

Twenty-four stocks reached 52-week highs when the gauge hit a record on May 23. That’s the lowest total during a market peak in at least a year, according to data compiled by Bloomberg.

Since 1990, there have been four other times when the S&P 500 set a 52-week high with fewer than 10 percent of its members peaking and the overall volume trailing the average, data compiled by Sundial show. In all but one occasions, the S&P 500 fell at least 5 percent in the next two or three months, the study showed.

Gains in the full index are being driven by its biggest constituents while most companies lag behind. Shares of Cupertino, California-based Apple Inc., which make up 3.3 percent of the S&P 500, have appreciated 13 percent in 2014 and climbed 7.3 percent in May.

Microsoft Corp. in Redmond, Washington, the world’s largest software maker, and New Brunswick, New Jersey-based Johnson & Johnson, the biggest health-care products company, have gained an average of 10 percent in 2014. At the same time, the 100 companies with the smallest weightings rose an average of 3 percent in 2014, according to data compiled by Bloomberg.

Worrisome Sign

“The lack of breadth at this point is clearly a worrisome sign that investors are reliant on fewer and fewer names,” Ed Clissold, U.S. market strategist at Venice, Florida-based Ned Davis Research Inc., said in a May 28 phone interview. “If those names have problems, there isn’t a leg for the market to stand on.”

Investors should be wary of piling into stocks when valuations are this high, according to Clissold. The S&P 500 traded at 17.7 times trailing earnings last week, the highest since April 2010, according to Bloomberg data. The measure has surged 49 percent since reaching a 30-month low in September 2011.

Market values “need to be looked at in conjunction with the less-than-stellar market breadth,” Clissold said. “You need to view rallies with suspicion.”

The U.S. stock market is trading in the tightest range in eight years, according to data from Bespoke Investment Group LLC. In the last three months, the difference between the S&P 500’s intraday high and low has been less than 5 percent, the Harrison, New York-based research group said in a May 22 report.

Money Printing

That’s happening as central bank officials gauge the strength of the U.S. economy to help determine the pace of cuts to stimulus efforts that have sent the S&P 500 up 184 percent from a 12-year low in 2009. The Fed pared its monthly asset buying to $45 billion in April.

“What altered this market is all the money printed by central banks,” Mary Ann Bartels, the New York-based chief investment officer of portfolio strategies at Merrill Lynch Wealth Management, said in a phone interview. The firm oversees about $1.9 trillion. “There is no textbook that tells us how markets are going to trade.”