If you’ve been paying attention this year, you know that the S&P 500 has been carried by the performance of the index’s largest components, and the chart below illustrates just how wide the disparity has been. It shows the YTD performance of each of the S&P 500’s members sorted by their market cap heading into 2020 with the largest stocks on the left side and the smallest stocks on the right. So far this year, the 50 largest stocks in the S&P 500 are up an average of 11.3% YTD, and if we were to take an even narrower look at just the ten largest stocks heading into the year, the average YTD gain is over 27%!
While the largest stocks are up a lot this year, the next 400 stocks in terms of market cap haven’t fared nearly as well, averaging a decline of 2.0%. That’s not great, but considering the pandemic this year, even a 2% decline isn’t such a bad thing. The same can’t be said for the smallest stocks in the S&P, however. As shown below, the 50 smallest stocks are down an average of 15.3% YTD, and more than two-thirds of them are down!
Another way to illustrate the declining fortunes of stocks this year based on their size is by looking at a moving average of YTD stock performance across the market cap spectrum, In the chart below, the first point on the chart represents the performance of the 50 largest stocks in the S&P 500 which have gained an average of 11.3% YTD. The next point to the right represents the average YTD change of the stocks that ranked between number 2 and 51 in terms of market cap at the start of 2020, and we continue that process down the entire list of components to the point where the last point in the series on the right side of the chart represents the average performance of the 50 smallest stocks in the S&P 500 heading into the year. As mentioned above, that group of stocks has averaged a decline of 15.3% YTD. The performance of the 50 largest stocks in the S&P 500 ranks as the fourth-best of 451 different points on the chart, while the basket of the 50 smallest stocks ranks as the 29th worst performing basket. In 2020, the bigger the stock, the better the returns. Click here to view Bespoke’s premium membership options for our best research available.