April 28, 2023
“It’s concerning to have such concentration in a few names, and all those companies are in the very similar tech and communication services sectors,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management. “This concentration will drive broader market performance until it doesn’t.”
View full article – Subscription required
1. Apple Inc. and Microsoft Corp. currently exert unprecedented influence over the S&P 500 Index. This heavy concentration is causing some investors to worry about the index’s increasingly top-heavy nature.
2. The combined weightings of these two companies in the benchmark have soared to a record 14% following strong earnings reports that have fueled a rally in technology stocks. If Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., and Nvidia Corp are included, nearly a quarter of every dollar put into the S&P 500 is split among these six companies.
3. Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, has expressed concern about the high concentration of these few tech and communication services companies in the index. He pointed out that this concentration will influence the broader market performance until it doesn’t.
4. Apple and Microsoft have added over $1 trillion in combined market value in 2023 alone, which accounts for nearly half of the gains for the entire S&P 500.
5. The world’s largest technology and internet firms have long dominated the benchmark index, but their stature was reduced in 2022 due to soaring interest rates and slowing growth, which caused valuations to plummet. Even though their stocks remain below peak levels, their superior performance this year relative to the market capitalization-weighted index is boosting their influence.
6. The tech giants have benefited from a flight to the perceived safety of their cash-rich balance sheets amid banking turmoil. Their momentum was further fueled by Microsoft’s profit and sales beating Wall Street estimates. Alphabet and Meta also exceeded expectations, which helped boost the tech-heavy Nasdaq.
Landsberg Bennett is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC (member FINRA and SIPC). Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.
This is not an offer to buy or sell securities, nor should anything contained herein be construed as a recommendation or advice of any kind. Consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. No investment process is free of risk, and there is no guarantee that any investment process or investment opportunities will be profitable or suitable for all investors. Past performance is neither indicative nor a guarantee of future results. You cannot invest directly in an index.
These materials were created for informational purposes only; the opinions and positions stated are those of the author(s) and are not necessarily the official opinion or position of Hightower Advisors, LLC or its affiliates (“Hightower”). Any examples used are for illustrative purposes only and based on generic assumptions. All data or other information referenced is from sources believed to be reliable but not independently verified. Information provided is as of the date referenced and is subject to change without notice. Hightower assumes no liability for any action made or taken in reliance on or relating in any way to this information. Hightower makes no representations or warranties, express or implied, as to the accuracy or completeness of the information, for statements or errors or omissions, or results obtained from the use of this information. References to any person, organization, or the inclusion of external hyperlinks does not constitute endorsement (or guarantee of accuracy or safety) by Hightower of any such person, organization or linked website or the information, products or services contained therein.
Click here for definitions of and disclosures specific to commonly used terms.