Real Returns Ex Big TechBy admin_45 in Blog
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.