Biggest Cap Stocks in S&P 500 are Behind its Superior Market Performance: Watch Out!
Biggest Cap Stocks in S&P 500 are Behind its Superior Market Performance: Watch Out! As the chart below shows, more than 18% of the market cap of the S&P 500 is represented by only five stocks. That’s an historic high. And since those stocks, mainly in the technology sector (Microsoft (MSFT), Apple (AAPL), Amazon (AMZN) Facebook (FB)) are up so much higher than the broader markets composed of smaller cap stocks, the S&P 500 gives a distorted and more optimistic view of the performance of the market as a whole. Historically, over-concentration in one sector is dangerous. Another way to look at it is those heavily invested in the S&P 500 (SPX) are betting mostly on the performance of a handful of stocks in one sector. So they may not be as safe as they think they are.