Home|About Us|Our Services|News|Resources|Disclosures|Client Login|Contact Us

S&P 500 Breaks Record For A Second Week

4804 2

(Friday, August 28, 2020, 8:25 PM EST)  The Standard & Poor's 500 (S&P 500) stock index closed Friday at a new all-time high for the second week in a row, as the two worlds of the S&P 500 and the real economy grew further apart.

FAANGM  -- Facebook, Amazon, Apple, Netflix, Google, and Microsoft -- led the recovery, the rest of the economy was on another planet.

4804 3

According to Craig Israelsen, Ph.D., who teaches portfolio design to financial professionals, the largest 25 stocks in the S&P 500 represented 42% of  the cap-weighting of S&P 500 index, as of August 21, 2020; the smallest 25 companies in the S&P 500 represented 0.3%  of the performance of the index. The terrible losses year-to-date on the smallest 25 stocks are not influential in the market-cap weighted S&P 500 index, but they reflect the world of pain in the real economy.

Of the 500 stocks in the S&P 500, 294 had a negative return through last Friday, Israelsen said. The average loss year-to-date return of the 294 companies was -24.1%.

4804 4

The S&P 500 stock index closed Friday at 3,508.01, a new all-time high, surging +3.21% from last Friday. It's +44.23% higher than its March 23rd bear market low.

As the S&P 500 breaks records, it's prudent to remember that the S&P 500 is not the real economy. The disconnect between the market-cap weighted S&P 500 and the broader economy is one of many anomalies caused by the Covid shutdown and recovery.

The bottom line is that the FAANGM stocks are not trading at outlandish valuation levels, not even close to the 1999 tech-bubble. At the same time, the performance of the S&P 500 is not reflecting the broad economy's pain. The two things are both true as the economic recovery from the pandemic, haltingly, has progressed.

Stock prices have swung wildly since the crisis started in March and volatility is to be expected in the months ahead.


The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial situation, or particular needs. Product suitability must be independently determined for each individual investor.

This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.


Email this article to a friend


This article was written by a professional financial journalist for Neiman & Associates Financial Services, LLC and is not intended as legal or investment advice.

©2020 Advisor Products Inc. All Rights Reserved.
 
Printer Friendly Version
Index
Americans Sit On A Mountain Of Cash Amid Pandemic
For High-Income Earners And Families, Failing To Plan Is A High-Stakes Gamble
Stocks Break Record, But Smart Money Is Focused On Taxes
Wall Street Reacts To D.C With A 7% Weekly Gain
On Election Eve, Here's The Economic Outlook
Sizing Up Economic Prospects
Two Good Economic Surprises
October Surprise May Be The Economy
Economic Signs Are Fine Amid The Distractions
Poverty Rate Dropped Again In 2019; A Sign Of Progress 
Stocks Dropped Last Week But Data Confirmed Economic Recovery
Amid A Mixed Week For Stocks, A Strong Recommendation
Is A Stock Bubble Bursting?
S&P 500 Breaks New Record; Small Business Picture Is Different
As If Coronavirus Never Hit, Retail Recovers
© 2020 Neiman & Associates Financial Services, LLC | 22 Mill Street, Suite 303, Arlington, MA 02476 | All rights reserved
P: 781-641-5700 | F: 617-812-2594 info@neimanonline.com |
Disclosure | Contact Us