The soaring stock market comes despite a flagging job market recovery and a Main Street economy that continues to be ravaged by the coronavirus pandemic.
The combined market cap of the S&P’s top five represent a whopping 25 percent of the entire index. Apple alone has a market cap of around $1.9 trillion — a figure slightly larger than the entire GDP of Canada last year. In their most recent earnings reports, the five biggest companies in the S&P 500 — Apple, Microsoft, Amazon, Facebook and Google parent Alphabet — all notched gains.
A small business, on the other hand, could be wiped out by a sustained slump in revenue — a reality many are facing today as federal assistance dries up. “You have companies on Main Street like your small mom-and-pop businesses — they're much less likely to adapt because they're living day by day,” said Luke Lloyd, wealth adviser and investment strategist at Strategic Wealth Partners.
“Most stocks are not making new recovery highs. If you remove the five largest stocks in the index, the S&P 500 would actually be down 4 percent rather than up 3 percent” this year, he said. “This narrowness of where investors are looking to put their money within equities is a big part of the story.”
The market’s current gains are especially vulnerable given that current prices implicitly expect both a lot more fiscal stimulus going to American households and businesses, as well as a breakthrough in a treatment or vaccine for the coronavirus.
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