A Tale of Two Indices
Even after today’s decline, the S&P 500 still sits on a year-to-date gain of over 10% indicating just how strong the first five months of 2024 have been. The Dow, however, has followed a much weaker path as it’s barely holding onto gains for the year at 2.2%.
The scatter chart below shows the YTD performance of the S&P 500 and the Dow in the first five months of the year, and they tend to track each other very closely. Even though the construction of the two indices is very different and 500 stocks comprise the S&P 500 compared to just 30 for the Dow, the performance of the two indices has been very similar over time. If one index is up in the high-single-digit percentages, the other usually is too. That’s what makes this year and last year so unique.
The S&P 500 is on pace to outperform the Dow by over eight percentage points in the first five months of this year, and that follows last year when the performance gap was even wider! As shown in the chart below, the last two years have seen the widest margin of outperformance between the S&P 500 over the Dow. In 1999, the Dow outperformed the S&P 500 by a similar magnitude, but the last two years have been unprecedented in terms of the S&P 500 outperforming the Dow.
The table below shows the YTD performance and weightings of the 30 Dow components (sorted by weighting). Overall, the average stock in the index has rallied 4.25%, so on an unweighted basis, the performance gap isn’t quite as wide, but one of the bigger drags on the Dow this year has been UnitedHealth (UNH). The stock’s weight in the Dow is over 8.5%, and shares have slipped nearly 4% on the year. Boeing (BA) doesn’t have as large of a weight in the index, but its 30%+ decline has been a big drag as well, while other notable losers have been McDonald’s (MCD) and Home Depot (HD).
Technology has been a large contributor to the S&P 500’s YTD gain, but within the Dow, the sector has a weighting of over 19%, which isn’t small. The only problem is the Technology stocks that comprise the index (shaded in gray). Regarding tech stocks in the DJIA, outside of Microsoft (MSFT), which has rallied over 14% this year, some of the sector’s other representatives – (we’re looking at you Cisco and Intel) aren’t what most investors would consider cutting edge!
Bespoke’s Brunch Reads – 3/10/24
This content is for members onlyBespoke’s Morning Lineup – 3/11/22 – It’s Friday
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.
“And Lord, we’re especially thankful for nuclear power, the cleanest safest energy source there is. Except for solar, which is just a pipe dream.” – Homer Simpson
It’s just a coincidence that Google searches for the term ‘nuclear war’ are hitting a record high as we’re marking the 11th anniversary of the Fukushima nuclear disaster in Japan, but the term nuclear has been showing up a lot lately. Whether it is Germany’s plan to shut down its nuclear power plants and make it even more reliant on Russian energy, or the Russian invasion of Ukraine that has raised risks of a nuclear accident at the site of the former Chernobyl plant or Ukraine’s other nuclear power plants that are operational, or the risk of nuclear war with Russia if NATO comes in to actively help defend Ukraine, you can’t get away from the subject of nuclear lately.
Thankfully, equity markets look to be putting a lot of these concerns aside temporarily giving investors a reprieve heading into the weekend. S&P 500 futures are currently up over 1%, crude oil is up over 1%, gold is down 1.5%, the 10-year yield is flat right at about 2.0%, and bitcoin is right around $40,000. The positive tone in equities was present for most of the night but just got an added boost shortly before 7 AM on reports that Russian President Putin said there were positive shifts in talks with Ukraine. At this point, the markets will take whatever good news they can get, but keep in mind that Putin is also the one who said Russia wouldn’t invade Ukraine.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
It’s been a pretty nasty week for US equities since the close last Thursday. During that span, the S&P 500 is down over 2% while the Nasdaq is down 3%. The worst performing sector during this period has been Consumer Staples (XLP) which is down close to 5%, while Technology (XLK) and Financials (XLF) are both down over 3%. Rounding out the top five of biggest losers, Communication Services (XLC) and Consumer Discretionary (XLY) are both down over 2.5%. Not surprisingly, all five of the aforementioned sectors are also at short-term oversold levels.
While most sectors are lower, three have managed to buck the trend over the last week. Energy (XLE) has been the biggest winner, rising close to 6%, followed by Utilities (XLU) and Real Estate (XLRE). Unfortunately for the broader market, though, these three sectors are also the smallest sectors in terms of their weightings in the overall S&P 500.
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Largest 25 Stocks in the S&P 500, Now vs 20 Years Ago
Yesterday, we took a look at the makeup of the S&P 500’s largest 25 companies in 2021 and compared it to that of 10 years ago. Today, we will be extending the study to 2001, twenty years ago right before the 9/11 attacks. On the day before 9/11, the sectors with the largest number of components in the top 25 in terms of market cap were Consumer Staples, Health Care, Technology, Financials, and Communication Services. While all of these sectors still hold a spot in the current top 25 list, the makeup has shifted substantially. Energy and Industrials, which each accounted for 8% of the top 25 companies in 2001, now have zero representation in today’s list. Consumer Staples also reduced its count from five to two.
Only seven companies that made up the list of top 25 names in September 2001 remain on the list today. Those seven companies are Microsoft (MSFT), J&J (JNJ), Walmart (WMT), Home Depot (HD), Procter & Gamble (PG), Bank of America (BAC) and Pfizer (PFE). The average increase in market cap of these seven equities, excluding dividends, is 241.88% with a median of 263.84%. While the turnover of this list has been high over the last 20 years, every member of this list is still in operation today, but two have been undergone mergers (Time Warner & Royal Dutch Petroleum). Interestingly enough, the members of this list have approximately the same proportionate makeup of the S&P 500, with only a 1.89% increase in the weightings of the top 25 stocks now relative to September 2001.
The US economy today is far different than it was in 2001. As it has changed, some companies have adapted and experienced massive growth, while others have been left in the dust. Apart from the two companies that are no longer independently publicly traded, the average return of the 25 largest companies from 2001 is 92.94% with a median return of 49.08%. Over that same period, the S&P 500 has returned 310.61%.
