Real Returns Ex Big Tech

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Real Returns Ex Big Tech

The five largest names in the S&P 500 – Microsoft, Apple, Amazon, Google and Facebook – are notionally “Big Tech” but they sit in 3 different sectors and meaningfully skew returns as well as investor perceptions of “what’s working”.

Example #1: Microsoft, Apple and Technology:

  • The Tech sector is down 5.1% YTD, which seems like a pretty big win given the S&P 500 is down 13.8% on the year.
  • Microsoft (22% weight) is up 9.0% YTD.
  • Apple (20%) is down 3.1% YTD.

Conclusion: take away MSFT and AAPL, and Tech is actually down 7.1% YTD. Still better than the S&P, yes, but remove the 2 stocks and returns are clearly worse.

Example #2: Google, Facebook and Communications:

  • Comm Services is down 11.3% YTD.
  • Google (23% weight) is down less, -5.6% YTD.
  • Facebook (19%) is actually down slightly more, -13.8% YTD.

Conclusion: Comm Services ex-GOOG/FB is down 13.1% YTD and therefore much closer to the market return.

Example #3: Amazon and Consumer Discretionary:

  • Consumer Disc is down 13.6% YTD.
  • Amazon (25% weight) is up 24.9% YTD.

Conclusion: without Amazon the Consumer Discretionary sector would be down 19.3% on the year, a result that feels much more consistent with the current state of the US consumer.