The S&P500 (SPX) is flat on the year (written prior to this morning’s 90 bps gap higher). The etf that tracks the SPX, the SPY, is up about 1% as of yesterday’s close, and up about 5% from a year ago. The top 10 holdings make up about 17% of the weight of the index of 500 stocks. Those 10 stocks make up $3.25 trillion in market cap, or about 15% of the index’s total market capitalization. A quick look at the year to date performance of these heavily weighted holdings shows some heavy lifting being done by a few of the largest stocks:
Looking at a smaller sampling of large cap U.S. stocks, the concentration is a bit more pronounced when you consider that the top 10 holdings make up 50% of the Nasdaq 100 (etf QQQ). The top ten holdings of the QQQ equal $2.6 trillion in market cap, or about half of the of the entire index that has a combined market cap a little more than $5 trillion.
The S&P 500 is churning around unchanged for the year. The Nasdaq Composite is up 5%. I bring this up to highlight the similarities (at least superficially) to what was going on in late 1999 and early 2000. Thinking back, we saw weakening breadth and fewer and fewer stocks powering the broad market gains. For example, in the S&P500, assuming now that the largest market cap company in the world, AAPL (at $722 billion) will fight the law of large numbers as it relates to returns is probably too hopeful. Therefore I think it makes sense to measure the health of the rally by how much these leaders are from their 52 week highs, as opposed to up on the year:
Think about it this way, the leadership in the market appears to have fallen by the wayside, excluding a few heavily weighted and much loved stocks.