S&P 500 gains are driven by Apple, Amazon, Microsoft, Alphabet and Facebook

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However, the index is weighted by market value. This means that the good performance of the five tech giants that dominate blue chips – Apple (AAPL), Amazone (AMZN), Microsoft (MSFT), Owner of Google Alphabet (GOOGL) and Facebook (FB) – distort the overall return of the S&P 500.

But the index tells a different story when you look at the many other stocks in the S&P 500. One FNB Invesco S&P 500 (RSP) which also weighs all members of the index is down more than 6% this year.

The market is not as strong without the tech Fab 5

Nearly 60% of the companies in the index were in the red of 2020 as of Thursday’s close, according to data from Refinitiv.

“Without the influence of Big Tech, the large market would not be as stable as it is today,” analysts at Zacks Investment Research said in a report last week.

Over-reliance on this tech quintet could become a problem if Congress and the President (whether it’s Donald Trump in a second term or Joe Biden) decide to impose stricter regulations or launch specific antitrust investigations against industry leaders soon after the election.

“While Congress is unlikely to pass meaningful legislation this year, there appears to be a growing consensus that the current course for Big Tech is not sustainable. From an investment perspective, the suggestion is that long-term outperformance may not be sustainable either. Zacks analysts wrote.

International stocks have gained more momentum lately

The strong gains from the best technologies also make the US market appear to be doing better than international stocks. But dig deeper and that too is wrong.

The strategists of Schwab (SCHW) Recently noted that if you exclude the 5 giant tech stocks and compare the S&P 500 only to international stocks, foreign companies have actually done a little better than the US market over the past three months.

The alphabet-soup-named SPDR MSCI ACWI ex-US ETF (CWI), which owns the largest international companies such as Alibaba (BABA), Tencent (TCEHY), See nicher (NSRGF), Taiwan Semiconductor (TSM) and Roche (RHHBF), is up nearly 5% since mid-June while the even-weighted S&P 500 ETF is up less than 1%.

“The outperformance of the largest US stocks hides a change in leadership from the middle stock: the average international stock has outperformed the average US stock,” said Jeff Kleintop, chief global investment strategist for Charles Schwab, in a report. report.

“The recent imbalances in the stock market can lead to vulnerability,” he added.

Even Warren Buffett seems to report that he finds more value abroad. The Oracle of Omaha Berkshire Hathaway (BRKB) recently bought stakes in five major Japanese trading companies.

“The fact that the world’s most famous investor has committed such large sums has ramifications for national and international perceptions of Japanese equities,” said John Vail, chief strategist of Nikko Asset Management, in a report. .

Vail believes the Berkshire approval “marks a real turning point” for Japanese stocks. He said bears no longer have a good argument for their skepticism.

“No one will be able to speak as harshly as the line usually should be,” But Buffett disagrees, “” said Vail.

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