The S&P's Back Hurts
S&P is up 23% YTD but not everyone is winning
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Who’s Pulling the S&P Higher?
Despite stellar returns for a hard year of investing, 90 companies, or 18.4%, of the S&Ps constituents, have had negative returns YTD
The biggest category, those returning between +20% → +50%, make up 38.2% of all the companies in the S&P but have 46.2% weighting of the entire index
The average return is 23.1% compared to the median return of 21.0%
Top 7 holdings of the index, which happens to be large-cap tech such as Google, Meta, Microsoft, Apple, Amazon, and Tesla, have had an average return of 36.9% but make up 24.9% of the index
Big names with high weighting in the index are the main culprits of why the S&P has had a great run this year despite what might be happening in your portfolio
Takeaway
Don’t be fooled by the return of the index this year. There has been a huge shift from growth to value as the FED becomes more hawkish and slows down QE and anticipates rate hikes in 2021. Bigger, safer names like the ones listed in the last bullet have become investor favorites as they look for areas to park their money that shows earnings growth and pricing power in this uncertain environment.
At the end of the day, make sure you’re investing in good businesses that you understand and would hold for the long term.
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