Big tech benchmark concentration

Patricia Bannan, CFA

May 20, 2020

Why we aren’t worried—through the lens of two flagship strategies.

As COVID-19 caused business activity to cease overnight, hospitals to become overrun and virus-related death tolls to escalate, panic set in on Wall Street. With the help of unprecedented fiscal stimulus, monetary actions by central banks around the globe and the potential for medical responses, investors began to look beyond the near-term volatility and disruption. By the end of April, the S&P 500 was down 10% on the year—a level some investors would have deemed reasonable earlier this year even in the absence of a worldwide pandemic. Yet, while the market as a whole was down 10% for the year, there was significant dispersion in the performance of individual stocks.

The S&P 500 was buoyed by the performance of its five largest constituents—Microsoft, Apple, Amazon, Alphabet and Facebook—which were up 10% as a group through April, while the median stock in the S&P 500 was down 16%. Together, those stocks represent approximately 20% of the index—the highest concentration the S&P 500 has ever seen from its five biggest members and much larger than the 40-year average of 14%.

Given the increased interest and concern of market dominance of technology stocks within the S&P 500, Head of Equities Patricia Bannan, CFA, and Portfolio Manager and Equity Analyst Jim Farrell, CFA, discuss top index constituents and how this impacts their own investment philosophies and outlook.

To learn more, listen to the podcast below and read the commentary.

Big Tech Benchmark Concentration commentary