Power Concentrated in the Hands of a Few

April 13, 2023 | Thomas Neuhardt, Associate Research Analyst

2022, marred by macro uncertainty and aggressive rate hikes, marked the worst year for the S&P 500 since the Global Financial Crisis. Given the sensitivity of growth stocks to increasing rates, technology-related equities underperformed and significantly detracted from the S&P 500 given the group’s large index weighting. In the first quarter, however, technology rebounded strongly — with the Information Technology sector up almost 22% and Communication Services up 20.5%, relative to the broad index +7.5%.

FAANG, comprised of Meta (formerly Facebook), Apple, Amazon, Netflix, and Alphabet (Google), is a well-known group of five large tech stocks. Although only five companies, the group contributes significantly to the performance of the S&P 500, positively or negatively, given the aggregate market capitalization of the stocks. The group reached its largest combined weighting in the index — 19.9% — at the height of COVID in August 2020, before retreating to a still-outsized 13.4% in early January 2023. Amid tech’s first quarter rally, FAANG alone drove almost half of the S&P’s 7.5% return and ended the quarter at 15.9% of the index. While there are many different macro and micro factors at play, the path of these mega-cap tech stocks will continue to be a key determinant of index returns.

Print PDF > Power Concentrated in the Hands of a Few

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.