Chart of the Month: The Top 5 Stocks Ruled the S&P 500 Index Until September

Source: Charles Schwab, Bloomberg, as of 11.13.2020

Performance based on market-cap weighted average of the five largest and 495 smallest S&P 500 stocks

Market Observations

The S&P 500 Index has staged a remarkable recovery from the pandemic-driven lows in mid-March. However, the performance has been driven by a handful of stocks, namely Facebook, Apple, Amazon, Microsoft, and Google. The market capitalization of these top five stocks now accounts for over 22% of the Index, after peaking at nearly 25% in early September. While these stocks have handily outperformed the other 495 stocks in the S&P 500 Index this year, and at several other important time periods during the current market cycle, a notable rotation is underway. After a blistering five-month rally from the late-March lows, these mega-cap stocks are no longer leading the market. Recent optimism surrounding the availability of an effective vaccine has driven the market back to all-time highs, with investors increasingly rotating away from the high-flyers into the most downtrodden stocks in the Index, such as financial services, energy, and airlines. It remains to be seen whether the trend will continue, but given the stretched equity valuations for the top five stocks, the recent pullback is not surprising.

Note: Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. Past performance is not a guarantee of future results.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

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