What you need to know
- Facebook, Amazon, Apple, Microsoft, and Alphabet now account for 18% of the S&P 500.
- That kind of index concentration hasn't been seen since 2000.
- However this time, analysts aren't anticipating a similar market implosion.
A report from Goldman Sachs has revealed that Facebook, Amazon, Apple, Microsoft, and Alphabet now account for 18% of the S&P 500.
The group, collectively known as FAAMG (because Alphabet is basically Google) has achieved index concentration in tech companies the likes of which has not been seen since 2000. According to the report:
Unlike 2000, analysts seem to be more confident that this time around, stock prices and values for the FAAMG group are keeping pace better with their earnings. Analysts also believe that "Lower growth expectations, lower valuations, and greater re-investment suggest the current concentration may be more sustainable than it proved to be in 2000."
The group is also leading the pack when it comes to reinvestment, charting three-year growth investment ratios of 48%. That's compared to just 21% in the rest of the S&P 500, and 26% for the five biggest companies in 2000, which was also lower than the rest of the index's 36%.
All of this is to say that the big five are crushing it, and no group has dominated the market like this since 2000. However, unlike last time, analysts seem pretty confident that the ship is steady.
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