Highly Concentrated US Stock Market in 2023: Top 10 Stocks Drive 89% of S&P 500's Return
Since the beginning of this year, the $S&P 500 Index(.SPX.US$ has experienced a remarkable increase of over 14.9%. However, data from Societe Generale reveals that nearly 90% of this surge can be attributed to the top 10 stocks, indicating an astonishing level of concentration in the US stock market.
The year 2023 has seen a remarkable rise in large technology stocks, with $NVIDIA(NVDA.US$ soaring by 232.82%, $Meta Platforms(META.US$ by 173.55%, and $Tesla(TSLA.US$ by 81.61%. These stocks have been the major driving force behind the impressive performance of the $S&P 500 Index(.SPX.US$ this year. According to recent research from Societe Generale, as of early November, the 10 best-performing stocks in the S&P 500 accounted for approximately 89% of the index's total return.
"This is by far the narrowest performance in post-GFC era if we count years in which S&P 500 has gained at least 10%," Societe Generale wrote.
Technology stocks have now hit their highest values ever concerning small-cap stocks. As of the closing price on November 13, 2023, the $NASDAQ 100 Index(.NDX.US$ closed at 9 times the $Russell 2000 Index(.RUT.US$. This ratio was even larger than during the peak times of the Dot-Com Bubble.
Recent research published by the Federal Reserve in September revealed that between 1980 and the early 2010s, the profit margins of the largest, large, and median companies were quite similar. However, this pattern changed after 2010, and profitability levels began to diverge among companies of different sizes. The largest companies' profit margins have been steadily increasing, while those of large companies remained flat, and medium-sized companies experienced a decline in their profit margins.
Wall Street strategists have projected comparable profit differentials for the earnings prospects of U.S. companies in 2024, while the overall earnings outlook follows historical patterns. Data compiled by Goldman Sachs showed that the "Magnificent 7" with strong year-on-year EPS expectations are expected to offer significant support to the S&P 500 index companies' overall EPS.
Since the beginning of this year, there have been notable performance differences among sectors in the U.S. stock market. The technology and communication services industries, which are primarily composed of the "Magnificent 7", have increased by more than 40%, while four of the eleven industries experienced losses, with utilities declining by over 13%.
Source: Markets Insider, Federal Reserve, Societe Generale, Goldman Sachs, moomoo
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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