More interesting, that around 2000 the top 5 was Microsoft, GE, Cisco, Intel, Walmart. Nothing last forever.
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Five Biggest Stocks Are 23% of S&P 500 Market Cap
31–40 of 86 posts
Re: Five Biggest Stocks Are 23% of S&P 500 Market Cap
#32Due to the trillions of dollars blindly going into index funds, thereby purchasing these stocks, are these five companies' stock prices way too artificially high ?
But since most index funds are market cap weighted, wouldn't the other 495 companies (assuming s&p 500 index, if you buy a all-cap index it might be 2000+ companies) go up the same % as well?
Re: Five Biggest Stocks Are 23% of S&P 500 Market Cap
#33Try the ETF with the symbol "RSP". It's an S&P 500 fund, but each of the 500 is equally weighted. In other words 0.2% of the fund. The theory is that the larger companies in the S&P 500 have less growth potential, or are already overvalued, compared to the smaller companies.
That theory doesn't make much sense. For example, surely Amazon has a lot more room to grow than Coca Cola.
Re: Five Biggest Stocks Are 23% of S&P 500 Market Cap
#34I'd have been surprised if it had turned out otherwise. I'd expect some kind of power law distribution, and it's not news that the biggest sticks are, well, huge. If the distribution falls away quickly enough, the result follows.
But the point is the concentration in the top 5 stocks has increased relative to recent years.
Re: Five Biggest Stocks Are 23% of S&P 500 Market Cap
#35The interesting thing is it's all one industry. Has that ever happened before? Oil was pretty dominant for a while, but nothing like this.
Re: Five Biggest Stocks Are 23% of S&P 500 Market Cap
#36I'm not sure whether people understand just how big of a problem this is. Resilient economies are well-balanced economies. When Big Tech falls - and it will eventually fall, because no industry is immune to corrections or busts - - the effect on the wider economy will be all the greater. The greater a share of the stock market that Big Tech holds, the larger the blast radius their failure will impose on the wider economy.
That FAANG constitutes such a large part of major market indices communicates a failure on the part of regulators. Not just the kind of regulation that technologists care about, i.e. protecting free software and open access, but economic regulation as well, that tries to smooth out the business boom and bust cycles and care about the health of the wider American economy.
Re: Five Biggest Stocks Are 23% of S&P 500 Market Cap
#37The interesting thing is it's all one industry. Has that ever happened before? Oil was pretty dominant for a while, but nothing like this.
I don't think it's fair to say it's one industry. Apart from the fact that they heavily use the internet, can you really say that Amazon and Facebook are the same industry? One is a social network, the other is a retailing and infrastructure shop
Re: Five Biggest Stocks Are 23% of S&P 500 Market Cap
#38The interesting thing is it's all one industry. Has that ever happened before? Oil was pretty dominant for a while, but nothing like this.
I don't think it's fair to say it's one industry. Apart from the fact that they heavily use the internet, can you really say that Amazon and Facebook are the same industry? One is a social network, the other is a retailing and infrastructure shop
Apple is also primarily a hardware company, Microsoft has it as part of its business (mostly successful in gaming).
Re: Five Biggest Stocks Are 23% of S&P 500 Market Cap
#39I'm not sure whether people understand just how big of a problem this is. Resilient economies are well-balanced economies. When Big Tech falls - and it will eventually fall, because no industry is immune to corrections or busts - - the effect on the wider economy will be all the greater. The greater a share of the stock market that Big Tech holds, the larger the blast radius their failure will impose on the wider eco…
And it isn't just FAANG. Look at Disney and Comcast and all the other conglomerates. The SEC and FTC have totally failed our country in the 21st century.
Re: Five Biggest Stocks Are 23% of S&P 500 Market Cap
#40Try the ETF with the symbol "RSP". It's an S&P 500 fund, but each of the 500 is equally weighted. In other words 0.2% of the fund. The theory is that the larger companies in the S&P 500 have less growth potential, or are already overvalued, compared to the smaller companies.
That theory doesn't make much sense. For example, surely Amazon has a lot more room to grow than Coca Cola.
I'm not sure; Coca Cola could start investing money and start buying up other food & drink brands.
I mean could you have imagined 10, 20 years ago that Disney would start to gobble up other companies like some weird Shoggoth monstrosity and multiply its stock value by 5-6 times?