The Sleeping Giants

The story inside the stock market has been all about rotation. It’s like the baton keeps getting handed from sector to sector. One week it’s energy and materials. Next week it’s tech and discretionary. So individual stocks go up and down while the group of stocks continues to rise.

The S&P 500 hit an all-time high today, and it’s doing it without any help from Amazon and Apple, two of the three biggest stocks in the index.

The past few years have been all about the FANMAG stocks. Their businesses were mostly uninterrupted by COVID-19, at least when it comes to financials. And as a result, their stocks had delivered outsized returns, as you can see in the chart below.

The tech giants peaked relative to the index in June of 2020. Yet, remarkably, the S&P 500 has been able to power ahead without this group leading the charge.* Instead, the index is being led higher by names like Exxon, JPMorgan, Bank of America, Wells Fargo, and Chevron.

I’m not going to look at that chart and pretend I can tell you where things are headed. But if you asked my opinion, I’d say that this looks fairly constructive. After months of underperformance, It wouldn’t surprise me if they’re ready to grab the baton again.

Josh and I will discuss this and much more on the newest edition of What Are Your Thoughts?

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*I know that Microsoft, Google, and Facebook are at all-time highs, but the other 3 are at the same spot as they were last August. 

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