View From The Top: 1999 vs. Now

Breadth has been the topic of the week with the market cap weighted S&P 500 pushing to new highs, leaving behind cumulative AD lines and equal-weight measures of the same index. This means the index’s largest stocks are providing an outsized boost to performance, so in the charts below we take a look at the weighting of those largest stocks over the years. As shown below, the combined market cap of what are currently the 30 largest stocks in the S&P 500 account for almost 53% of the index.  Looking back to the comparable point of the year 5, 10, 15, 20, and 25 years ago, it has been common for the 30 largest stocks to account for around 40% of the S&P 500’s total market cap. However, the current reading is over 10 percentage points higher than even June 1999 when the 30 largest accounted for 42.18%.

As we have mentioned in the past, even though one stock may be a giant at one point in time, it is not guaranteed to hold its dominance.  In the chart below we show the number of stocks that currently rank as one of the top 30 largest S&P 500 members and also ranked in the top 30 in years past. As shown, only around half of the current mega-caps were also mega-caps of a decade ago.  Setting the calendar back a quarter century, a third of the 30 largest S&P 500 stocks were also in the top 30 in 1999.

Below we show the 30 S&P 500 members that currently have the largest market caps.  Of these, there are only a couple, Tesla (TSLA) and Johnson and Johnson (JNJ), that have provided a negative return in the past year. Granted, TSLA has also been a ten bagger over the past five years. The only other stock that boasts such an outstanding gain is, of course, NVIDIA (NVDA).

Below is a look at the 30 largest stocks in the S&P 500 as it stood twenty-five years ago in June 1999.  As previously mentioned, there are ten stocks in the current top 30 that were in the top 30 in June 1999 (highlighted in grey below).  At the top of the list is the familiar face of Microsoft (MSFT) with an inflation adjusted market cap (in 2024 prices) of $816 bn back then.  Like TSLA and NVDA now, MSFT had also been a ten bagger over the previous five years.  However, one difference between 1999 and now is that stocks with such large gains had much more company back then. Whereas currently there are only two of the 30 largest stocks that are up 1,000%+ in the last five years, in 1999 there were five: MSFT, Cisco (CSCO), WorldCom, Time Warner, and Dell (DELL).  Again, only one of those is still a mega-cap today while others like WorldCom had more dramatic falls from grace following bankruptcies only a few years later.

In comparing 1999 to today, currently the S&P 500 is in fact more concentrated at the top. Just the top three stocks today—MSFT, AAPL, and NVDIA—account for over 20% of total S&P 500 market cap compared to around 9% for the comparable three—MSFT, GE, and Exxon—in 1999.

Bespoke’s Morning Lineup – 6/18/24 – Breadth Bounces (For a Day)

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“The greatest danger occurs at the moment of victory” ― Napoleon Bonaparte

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

It’s only Tuesday, but futures are little changed ahead of what may feel like a Summer Friday as markets are closed tomorrow in observance of Juneteenth and the northern parts of the country bake in the first heatwave of the summer season.  Between now and the closing bell, investors will still have to contend with Retail Sales at 8:30, Industrial Production and Capacity Utilization at 9:15, and then Business Inventories at 10 AM.  How these reports come in relative to expectations will go a long way in determining whether the Nasdaq can stretch its current winning streak to a lucky seven. The first wave of these reports was just released as Retail Sales came in weaker than expected across the board, and April’s numbers were revised lower.

Overnight in Asia, Japan bounced from yesterday’s 1%+ decline with a gain of 1% while most other major indices in the region rallied by smaller amounts. In Australia, the RBA left rates unchanged at 4.35%, and Chinese Premier Li wrapped up his visit to the country and expressed optimism that the two countries could improve their ties. The tone in Europe is also positive this morning with the STOXX 600 up about 0.5%. CPI for May came in at 0.2% which was in line with expectations and down from April’s reading of 0.6%, but the ZEW Economic Sentiment Index showed a much smaller than expected improvement.

Just when the conversation over the divergence between the S&P 500’s price and breadth reached a fever pitch, the S&P 500 kicked off the week yesterday with a gain of 0.77% and a breadth reading of positive 214, the strongest daily breadth reading of the month! The lack of strong breadth readings would have been understandable in a steadily declining market. This month hasn’t been weak, though; more than half of all trading days have seen record highs!

Even after yesterday’s positive breadth reading, there have still been seven trading days over the last four weeks (20 trading days) where the S&P 500 traded higher on a day when more stocks finished lower than higher.  That’s one of the largest number of negative divergences in four weeks since at least 1990, and the most since August 2020 when there was a record of eight days where the S&P 500 traded higher and breadth was negative.  Back then, the narrative was that the mega-cap tech stocks would benefit the most from the lockdowns and the new world of working from, learning from, eating from, socializing from home, etc.  Four years later (can you believe it’s already been four years?), these same (and some different), mega-caps are now seemingly the only ones with the scale to benefit from AI.

To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.

Bespoke’s Morning Lineup – 6/17/24 – 99 Outperformers and the Dow Ain’t One

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“I’m afraid there are no replays or second chances in amateur or professional golf, and that’s the way it should be.” – Rory McIlroy

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

S&P 500 and Nasdaq futures are off to an ever so slightly positive start to the week as the Dow underperforms with modest declines, and in other news, the sun also came up this morning. The underperformance of the Dow and smaller cap stocks relative to Nvidia (NVDA) the S&P 500 won’t last forever, but it hasn’t shown any signs of stopping either.

The only economic indicator on the calendar today is the New York Fed’s Empire Manufacturing report which was less negative than expected (-6.0 vs -10.0) after a reading of -15.6 last month.  It’s a quiet week for earnings, and the only earnings reports after the close are La-Z-Boy (LZB) and Lennar (LEN). Overnight, Asian stocks were mostly lower with Japan leading the way as the Nikkei dropped nearly 2% as BoJ Governor Ueda suggested that a July rate hike is possible and that the pace of bond purchases would slow. In Europe, equities attempted to rebound from last week’s declines early on but erased all of those early gains, and the STOXX 600 is now marginally lower.

In the realm of strange weeks, last week fit the mold.  The S&P 500 rallied 1.58% for the week, yet just 183 stocks in the index finished the week in positive territory, and only 99 stocks outperformed the index. That’s the definition of a top-heavy index. At the sector level, the disparities were just as pronounced. With the Technology sector surging more than 6%, it was the only sector that outperformed the S&P 500, and the only other sector that finished the week even up 1% was Real Estate.  On the downside, two sectors – Energy and Financials- were down 2%, another two were down at least 1%, and three more finished down for the week. How often do you remember a week when the S&P 500 was up over 1% but twice as many sectors were down at least 1% than up 1%?

Digging down another level, of the 24 S&P 500 industry groups, only three managed to outperform the S&P 500, and they were all part of the tech sector (Semis, Tech Hardware, and Software). Here again, nearly twice as many industry groups finished the week down at least 1% (nine) as up 1%, and three times as many finished the week lower (18) as higher (6).  It may have been an up week, but if your portfolio underperformed or was even down for the week, you were not alone.

To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.

Brunch Reads – 6/16/24

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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On This Day in History:

A House Divided: On June 16th, 1858, Abraham Lincoln declared, “A house divided against itself cannot stand.” This statement, made during his campaign for the Illinois Senate seat, addressed the escalating tensions between the Northern and Southern states over the issue of slavery. Lincoln believed that the country could not permanently endure half slave and half free, and he urged for a unified stance. As history recalls, Lincoln was absolutely correct as those moral and political rifts would soon erupt into the Civil War. After becoming president, his vision of a united nation, free of slavery, shaped the course of American history. Today, Lincoln’s “house divided” speech resonates as a reminder of the dangers of deep-seated divisions within a nation and the importance of seeking common ground.

AI & Technology

ChatGPT is baked into Apple Intelligence (Engadget)
Apple’s WWDC 2024 was this past week, and the tech titan confirmed its partnership with OpenAI to integrate ChatGPT into iPhones and other devices, powered by GPT-4o. It will enable cloud-based Apple Intelligence queries in iOS 18, iPadOS 18, and macOS Sequoia. The new AI-powered Siri can access ChatGPT’s knowledge base for various more complicated tasks that Apple’s smaller LLMs cannot handle like providing menu ideas with specific ingredients or offering decorating advice based on photos. Additionally, Siri can assist with documents, presentations, and PDFs. The OpenAI integration is set to launch later this year. [Link]

Milei Adviser Expects Major Tech Investments Within Eight Weeks (BNN Bloomberg)
Argentine President Javier Milei’s administration is poised to announce big tech investments of over $1 billion within the next eight weeks following a visit to Silicon Valley. Milei and senior adviser Demian Reidel pitched Argentina’s favorable conditions for data centers and its educated workforce to tech giants like Apple, Meta, and Alphabet. Despite Argentina’s protectionist past, Milei aims to make the country a tech-friendly hub, focusing on AI and technology investments. Additionally, Milei plans to lift capital controls to attract more foreign businesses, enhancing job creation and economic growth. [Link]

Pentagon embracing SpaceX’s Starshield for future military satcom (SpaceNews)
The US Department of Defense (DoD) plans to integrate over 100 SpaceX Starshield satellites into its future satellite communications (satcom) architecture by 2029. Starshield, a militarized version of SpaceX’s commercial Starlink satellites, features enhanced encryption and security. Col. Eric Felt highlighted the success of Starlink for US forces and emphasized the importance of cybersecurity and diversification in LEO architecture. The DoD’s increasing demand for satellite internet services is already evident given the use of Starlink under current procurement contracts, and plans to further expand capabilities with Starshield and other commercial services like Amazon’s Project Kuiper, only reinforces the trend. [Link]

Using AI for Political Polling (Ash Center)
Public polling, a cornerstone of modern political campaigns, has issues with skyrocketing nonresponse rates and respondents’ reluctance to share true opinions. Pew Research highlighted a drop from 36% of respondents in 1997 to just 6% in 2018. Additionally, people often provide socially desirable or partisan-driven responses. Some now say that AI offers a transformative potential for polling by using large language models (LLMs) to simulate and analyze public opinion from vast online data, providing instant insights across demographics and scenarios. Researchers are developing AI agents to mimic survey populations. It’s concerning to think AI will anticipate human responses by generalizing and be considered accurate. Can an AI model accurately represent the individual opinions of a diverse group of respondents? [Link]

How Amazon blew Alexa’s shot to dominate AI, according to more than a dozen employees who worked on it (Yahoo Finance)
Amazon’s ambitious plan to revamp its Alexa voice assistant with advanced generative AI has been rocky, despite a flashy demo in September 2023 showcasing a more conversational and natural-sounding Alexa. Former employees suggested that Alexa’s new LLM is far from state-of-the-art, hindered by limited data and access to specialized GPUs. Amazon’s focus on other generative AI priorities like its AWS service has further delayed Alexa’s development. It’s tough to say whether Alexa can catch up to rivals like Google and OpenAI in the AI race, with many questioning if Amazon’s vision for a transformative AI-powered assistant will ever be realized. [Link]

Environmental & Energy

The US installed more solar in Q1 2024 than it did in all of 2018 (Electrek)
In Q1 2024, the US saw unprecedented growth in solar manufacturing, achieving a total installed capacity of 200 GW. This included a record-setting 11.8 GW of new solar panel manufacturing capacity, representing 75% of all new electricity-generating capacity added to the US grid during this period. Once this capacity becomes fully operational, it will be capable of meeting 70% of US demand. Notably, the US added over 40 GW of new solar capacity in 2023, with another 40 GW projected for 2024, driven by substantial utility-scale deployments in states like Florida and Texas. Despite challenges such as labor shortages and trade policy uncertainties, the US solar industry is set to more than double its capacity by 2029, reaching 438 GW. [Link]

Major oil surplus seen this decade as demand peaks, IEA says (BNN Bloomberg)
The International Energy Agency (IEA) predicts a major surplus in global oil markets this decade as demand plateaus amid the rise of EVs and improved fuel efficiency. By 2029, world oil consumption is expected to level off at 105.6 million barrels per day, while production, led by the US, will exceed demand by 8 million barrels per day. This surplus, the largest since the Covid-19 lockdowns, could exert downward pressure on prices. Despite continued demand growth in countries like India and China, developed economies will see a decline in oil use. [Link]

In Wyoming, Bill Gates moves ahead with nuclear project aimed at revolutionizing power generation (AP News)
Bill Gates and TerraPower have started construction on a next-generation nuclear power plant in Kemmerer, Wyoming, which intends to revolutionize energy generation with advanced technology. The plant, which uses sodium instead of water for cooling, is different from traditional reactors and is expected to cost up to $4 billion, with half funded by the US Department of Energy. This project, the first of its kind in four decades in the US, is designed to be safer, more efficient, and cheaper. TerraPower’s reactor will provide up to 500 megawatts of carbon-free energy, enough for 400,000 homes, and could later support industrial processes requiring high heat, currently reliant on fossil fuels. [Link]


EVs Could Last Nearly Forever—If Car Companies Let Them (The Atlantic)
In April, Hansjörg von Gemmingen-Hornberg’s 2014 Tesla Model S became the first electric vehicle to drive 2 million kilometers. This journey, however, was not without its challenges, involving multiple battery and motor replacements. The longevity of EVs is becoming more achievable due to fewer moving parts and better battery technology, which may soon make it common to see EVs with million-mile lifespans. Despite the potential for extended vehicle longevity, car manufacturers may incentivize frequent upgrades through planned improvements and software incompatibilities, echoing the consumer electronics industry’s model. [Link]

Thefts of charging cables pose yet another obstacle to appeal of electric vehicles (AP News)
The theft of EV charging cables is becoming a problem across the United States. In Seattle, two men were recorded stealing cables from a charging station, a scene that depicts a trend driven by the high price of copper. These thefts disable charging stations, causing frustration for EV owners forced to find alternate charging spots. This issue complicates the efforts of automakers pushing for wider EV adoption amid concerns about charging infrastructure. Charging companies and law enforcement are stepping up security measures to combat this growing problem. [Link]


Nvidia juggernaut upends markets (Financial Times)
Nvidia has surged to a market cap of over $3 trillion, surpassing giants like Apple and entire stock indices like France’s CAC 40. The chip maker’s gain of over 147% so far this year, after 2023’s 239% gain, has made it a go-to investment for both high-risk and stable investment strategies, drawing massive investor interest. Given the current environment of high inflation, interest rates, and geopolitical tension, asset manager Carmignac is an example of the shifting focus from long-term government debt to short-term debt and a “barbell” of exposure to stocks of what it calls lower-risk tech stocks like Nvidia. [Link]


Getting death threats from aggrieved gamblers, MLB players starting to fear for their safety (USA TODAY)
Major League Baseball players are receiving threats, particularly due to the rise of sports gambling. Players like Arizona Diamondbacks’ Paul Sewald and Logan Allen recount receiving death threats and being followed home by enraged bettors. The MLB Players Association has pushed for stronger protections, resulting in new rules against betting-related abuse and the establishment of a safety hotline. However, the aggressive behavior fueled by gambling shows no signs of abating, with players constantly targeted by fans upset over lost bets. [Link]

Economic Trends

New York Fed Is Losing Talent and ‘Street Cred’ Under John Williams (BNN Bloomberg)
John Williams, the president of the Federal Reserve Bank of New York, has faced criticism since his 2018 appointment due to staff departures and concerns over his lack of market experience compared to his predecessors. The departures of several senior officials with over a decade of experience have sparked worries about a talent drain at the bank and its ability to manage future financial crises. Though Williams is a respected macroeconomist, the situation has led to reliance on other regional Fed presidents with stronger finance backgrounds, potentially reshaping the dynamics of market intelligence and policy implementation. [Link]

Health & Wellness

Pentagon ran secret anti-vax campaign to undermine China during pandemic (Reuters)
During the height of the COVID-19 pandemic, the US military secretly launched a campaign to undermine China’s influence in the Philippines by spreading anti-vaccine propaganda. It was meant to cast doubt on the safety of Chinese vaccines and medical supplies using fake social media accounts impersonating Filipinos. The campaign, which extended beyond Southeast Asia, sought to exploit religious concerns and erode trust in China’s aid efforts, with repercussions that included increased vaccine hesitancy and potential risks to public health. Despite objections from US diplomats and the eventual termination of the campaign in mid-2021, the operation has raised ethical and geopolitical concerns. [Link]

Michigan’s Largest Insurer to Drop Weight-Loss Drug Coverage (BNN Bloomberg)
Starting in January, Blue Cross Blue Shield of Michigan will discontinue coverage of GLP-1 obesity drugs, such as Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound, for nearly 10,000 people under fully insured large group commercial plans. This decision reflects concerns over the drugs’ effectiveness, safety, and high costs, with list prices exceeding $1,000 per month per user (OK, it’s mostly high costs!). Medicaid coverage for these drugs varies, and many Affordable Care Act Marketplace plans also do not cover them for obesity. New restrictions will be introduced from August to December, including in-person consultations and a higher BMI threshold for eligibility. Novo Nordisk and Eli Lilly have expressed disappointment, emphasizing the importance of these medications for health. [Link]

Policy & Law

His Ex Is Getting His $1 Million Retirement Account. They Broke Up in 1989. (WSJ)
Jeffrey Rolison’s long-lost girlfriend from the 1980s, Margaret Losinger, might inherit his $1 million retirement account due to a 1987 beneficiary form, despite their relationship ending nearly 40 years ago. Rolison’s brothers are contesting this, arguing he wouldn’t have intended to leave her the money. The legal battle highlights the critical importance of up-to-date beneficiary designations on retirement accounts, which typically override wills. Procter & Gamble, Rolison’s former employer, has been embroiled in the dispute, with courts so far siding with Losinger. [Link]

Wells Fargo Fires Over a Dozen Wealth Staff for ‘Simulation of Keyboard Activity’ (AdvisorHub)
Wells Fargo recently fired over a dozen employees from its wealth and investment management unit after discovering they were faking work activity using devices that simulate keyboard movements. “Mouse movers” are used for remote work to keep from appearing offline, although it’s unclear if the firings were related to remote work. Wells Fargo, which has been gradually bringing employees back to the office since early 2022, emphasizes its commitment to high ethical standards. This episode is reminiscent of a 2018 scandal where employees were investigated for expense policy violations. [Link]

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Have a great weekend!

This Week’s Can’t-Miss Analysis — 6/14/24

We publish a lot of market-related content each week, and we want to make sure you don’t miss the most important topics.  Below are some charts and tables we view as “can’t miss” from the last week.  

Our first charts show the one-year trading ranges for the S&P 500 and the Technology sector, which has led the broader market. Both have maintained a strong upward trajectory, but they’re now trading at extreme overbought levels to a point where we’d expect to see some downside mean reversion soon.

The tech-heavy Nasdaq 100 ETF (QQQ) is up 16.5% YTD driven by a handful of mega-caps. However, the Nasdaq 100 Equal Weighted ETF (QQQE) is up just 4.1% YTD in comparison. The high-flying QQQ traded to new all-time highs and way more above its 50-DMA than QQQE which hasn’t made a higher high since late March.

To continue reading the rest of this week’s “Can’t-Miss” analysis, which includes another dozen or so important market-related topics, start a two-week trial to Bespoke Premium today!  With a two-week trial, you’ll also receive our daily research in your inbox as it gets posted.  Go ahead and give it a try by signing up at this link.

Have a great weekend!

Bespoke’s Morning Lineup – 6/14/24 – Low Yields

See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“Common sense is seeing things as they are; and doing things as they ought to be.” – Harriet Beecher Stowe

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

The S&P 500 has been up for each of the last four trading days this week, and each of those closes has been a record high, but the streak is unlikely to continue today based on where futures are trading. Import Prices were just released and showed a larger than expected m/m decline (-0.4%), but in the ranks of economic reports, Import Prices isn’t at or even near the top.  The only other report on the calendar is the Michigan Sentiment report at 10 AM.  Interest rates have continued to decline this week, so even if the Fed doesn’t feel like cutting rates at the moment, the market is lowering long-term rates.  The 10-year yield traded to its lowest level since late March this morning while the 2-year yield was at its lowest since early April.

The haves vs the haves nots market trend continued yesterday as the S&P 50 closed at a record high and the Dow was down. If that sounds familiar, it’s because it was the fifth straight day that the S&P 500 outperformed the DJIA. That may sound somewhat extreme, but just back at the end of May, the S&P 500 outperformed the DJIA for eight days in a row, and besides that, there have been three other streaks this year where Wall Street’s equity benchmark outperformed the Main Street equity benchmark for at least five days.

Over the last month, there have been 16 trading days where the S&P 500 outperformed the DJIA daily, and looking at the post-financial Crisis period, these streaks haven’t been rare, but they’re also not particularly common. The last time there were as many days of S&P 500 outperformance over a 21-trading day period, was in May 2023, and there have only been four other periods when there were more days of S&P outperformance in a month.

To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.

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