The market has seemed pretty top-heavy lately. We think the concerns around weak breadth have been a little bit overstated, though, as we mentioned in our Chart of the Day yesterday. But it’s still worth asking the question: how much of the market’s gain is attributable to the largest stocks? Below we show three series. The light blue line is returns for the S&P 500 YTD. In the dark blue line, we strip out the performance contribution of the five largest stocks in the S&P 500: Apple (AAPL), Facebook (FB), Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL). As shown, while the overall index is up almost 8% so far in 2017, it’s up only 4.6% if you strip out the five largest stocks. In the red series below we show the spread between the two, in other words, the cumulative performance contribution from those 5 stocks. At the start of the year, these five stocks accounted for 11.6% of the index’s market cap, so you’d expect a non-trivial percentage of gains to come from them. That share stands at about 13.7% today. Generating nearly half of the index’s gains with less than 15% of its market cap is an out-sized contribution and shows just how painful it can be in terms of relative performance if you’ve been underweight these mega-Tech behemoths.
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