The Only Thing Working Right Now

If it seems like tech stocks are the only thing working right now, trust your intuition.

The five largest stocks in the S&P 500, Microsoft, Amazon, Apple, Google and Facebook, collectively represent a piece of the pie that is larger than any other five stocks since the late 1970s (The following two charts come from Jim Bianco).

While the rest of the market tumbles, Microsoft, Amazon, and Apple have retained their trillion dollar status. Microsoft alone represents ~5.5% of the index, higher than its peak weighting during the dotcom bubble.

The five largest stocks have as big a weighting in the S&P 500 as the bottom 350 stocks in the index, up from 282 in July 2018 (sorry, I couldn’t help it).

The move higher in tech stocks while the rest of the world moves lower has led to an amazing data point; James Mackintosh over at The Wall Street Journal reported that stocks listed on the Nasdaq are worth as much as the MSCI World ex-USA index, a benchmark that includes 1,007 large and mid cap stocks from developed markets outside the United States with a median market capitalization of $5.8 billion.

We’ve been talking about the giant growth stocks that are in favor, but investors are also clamoring for small growth, particularly relative to small value. Jason Goepfert at SentimenTrader notes that the last three times that small growth/small value got this overbought, a market downturn wasn’t far away. As always, take these numbers with a grain of salt, especially when N=3, but very interesting nonetheless.

Betting against tech/growth has been a losing trade for years now, but at some point you would think this train has to slow down. Or not. Maybe I’ll do this post two years from now and the top five will be equal to the bottom 400.