Weekly market update 11/17/2023

The S&P 500 posted its third straight week of big gains as interest rates continued to back off some of their highest levels in well over a decade and the week’s inflation data showed renewed signs of deceleration.  As a result, the S&P 500 is up over 7.5% in November and on pace for the index’s strongest monthly gains in over a year.  The strength has not been limited to just the S&P 500 either, with the small-cap index (the Russell 2000) surging over 5% on Tuesday alone.  A welcome development after small and mid-cap stocks have struggled mightily all year.

THE MAGNIFICENT SEVEN

While small and mid-cap stocks have struggled in 2023, the seven largest stocks in the S&P 500, or mega caps (Microsoft, Apple, Amazon, Nvidia, Alphabet, Meta, and Tesla), have massively outperformed the broader market and have been dubbed “The Magnificent Seven”.  These seven stocks have on average risen over 100% year-to-date and now make up roughly 29% of the market cap of the S&P 500, the largest share the top seven stocks have comprised in the history of the index (see chart below from Goldman Sachs). 

As a result, this narrow group of stocks has contributed roughly 90% of the S&P 500’s year-to-date gains (per Bianco Research), and investors with diversified equity portfolios have almost by definition underperformed.  Therefore, this week’s strength within the other 493 stocks in the S&P 500 is a welcome development as broader market rallies are typically viewed as more sustainable and healthier.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

Thanks to our clients and friends who have referred business to us over the years.

Your endorsement has been the cornerstone of our growth and our greatest compliment.