S&P 500 Breaks Record For A Second Week
Published Friday, August 28, 2020, 8:25 PM EST
The Standard & Poor's 500 (S&P 500) stock index closed Friday at a new all-time high for the second week in a row, as the two worlds of the S&P 500 and the real economy grew further apart.
FAANGM -- Facebook, Amazon, Apple, Netflix, Google, and Microsoft -- led the recovery, the rest of the economy was on another planet.
According to Craig Israelsen, Ph.D., who teaches portfolio design to financial professionals, the largest 25 stocks in the S&P 500 represented 42% of the cap-weighting of S&P 500 index, as of August 21, 2020; the smallest 25 companies in the S&P 500 represented 0.3% of the performance of the index. The terrible losses year-to-date on the smallest 25 stocks are not influential in the market-cap weighted S&P 500 index, but they reflect the world of pain in the real economy.
Of the 500 stocks in the S&P 500, 294 had a negative return through last Friday, Israelsen said. The average loss year-to-date return of the 294 companies was -24.1%.
The S&P 500 stock index closed Friday at 3,508.01, a new all-time high, surging +3.21% from last Friday. It's +44.23% higher than its March 23rd bear market low.
As the S&P 500 breaks records, it's prudent to remember that the S&P 500 is not the real economy. The disconnect between the market-cap weighted S&P 500 and the broader economy is one of many anomalies caused by the Covid shutdown and recovery.
The bottom line is that the FAANGM stocks are not trading at outlandish valuation levels, not even close to the 1999 tech-bubble. At the same time, the performance of the S&P 500 is not reflecting the broad economy's pain. The two things are both true as the economic recovery from the pandemic, haltingly, has progressed.
Stock prices have swung wildly since the crisis started in March and volatility is to be expected in the months ahead.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial situation, or particular needs. Product suitability must be independently determined for each individual investor.
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
- A Financial And Tax Planning Strategy For This Week's Stock Market Plunge
- Having Trouble Tuning Out The Bad Financial Economic News?
- A Key Signal Of Strength At A Pivotal Moment In Economic History
- Despite Strong Jobs Report, Stocks Declined Last Week
- The Fed Risks A Recession To End Inflation, As Expected
- Stocks Snap Four-Week Win Streak
- Stocks Have Soared Lately, But What Should You Expect Near And Long-Term?
- Investing In An Economy Beset By Multiple Anomalies
- Despite Bad Economic News, Stocks Rose 4% In The Week Ended July 29, 2022
- Amid Bad Data Releases, Leading Economists Predict No Recession
- Good News: Real Retail Sales Dropped Fractionally In The Past Year
- Financial Economic News Analysis
- The Good News Is All This Bad News
- Four Signs A Recession Could Be Short And Shallow
- Odds Of A Soft Landing Shrunk After Friday's News
- Bad Inflation Surprise Sends Stocks Down Sharply
- It Could Be A Long, Hot Summer For Investors
- What A Difference A Week Makes
- Amid Stock Market Turmoil, +2.3% Growth Projected In 2022
- Staying On Track Amid The Ukraine And Inflation Crises
- For Investors, 2022 Is Turning Into A Test
- Is The Economy Brightening? Or Is The Federal Reserve Slamming The Door On Growth
- Financial Economic News In Perspective
- Stocks Closed Lower This Week On Inflation Fears