Five stocks – Microsoft, Apple, Amazon, Facebook and Google – now represent 21.65% of the S&P 500. During the tech bubble, the top 5 stocks of the S&P 500 only reached 18% of the index.
Over the past month, the share of these 5 stocks in the S&P 500 has increased, driven by Q2 earnings beats. While StateStreet’s popular S&P 500 ETFs (NYSEARCA: ESPION), iShares (NYSEARCA: IVV)and Vanguard (NYSEARCA: VOL) are up 5.9% from a month ago, Apple is up 16.51%, Amazon 14.71% and Facebook 11.71%. The Alphabet / Google share price slightly underperformed the index with an increase of 4.93% over the past month, and the only big lag is Microsoft, up just 0.74%.
The market-capitalization-weighted S&P 500 Index, with its full concentration in the top 5 technology stocks, once again outshines the equal-weighted version of the S&P 500. In the last month, the ETF for the weighted version equal to the index, the Invesco S&P 500 Equal Weight ETF (NYSEARCA: RSP), rose 0.5% less than market capitalization-weighted ETFs.
This confuses those who argue that the market cap-weighted S&P 500 is becoming unnecessary due to its focus in the top 5 technology leaders. And the outperformance of the top 5 stocks makes it difficult for fund managers who do not have sufficiently concentrated positions in Microsoft. (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Facebook (NASDAQ: FB) and Google (NASDAQ: GOOG) to beat the index.
For more, check out the exact allocation of SPY’s top 10 stocks and this remarkable tirade against the index by a fund manager.