What Does the S&P 500 Reflect?

Sep 2020

We think the S&P 500 is marching to the beat of a much different drummer this year.  The weights of the largest companies in the S&P 500 have increased to the point that the S&P 500 is no longer a reasonable measure of most stock prices or portfolios.  It’s in a league of its own, with far above normal concentration in a handful of stocks … When 1% of the S&P 500 companies (Apple, Microsoft, Amazon, Google, Facebook) account for 24% of its weight and produce a year-to-date return through late August averaging about 57% (for the top five companies), it should be clear the S&P 500 is not reflective of the broad stock market.  Indeed, the S&P 500 minus its five largest companies has a year-to-date return that’s negative.