The S&P 500 is up 2.3 percent this month, the best month since February, but it’s a lopsided gain, weighted toward Technology.
Sectors in October
Technology: up 7.6 percent
Materials: up 4.1 percent
Banks: up 1.8 percent
Industrials: up 0.4 percent
Technology is so strong this month that it accounts for 75 percent of the gain in the S&P 500, according to Standard & Poor’s. Without tech, the S&P would only be up roughly 0.5 percent.
It’s worse than that: Five stocks are responsible for most of the gains.
Big Tech in October
Facebook: up 15.5 percent
Amazon: up 12.5 percent
Apple: up 8.2 percent
Google: up 6.1 percent
Microsoft: up 6 percent
Amazon is a consumer discretionary stock, not a technology stock, but you get the point … the gains this month are very lopsided.
Those five stocks accounted for 52 percent of the gain in the entire S&P 500.
Think about that: Five stocks (1 percent of the S&P 500) accounted for 52 percent of the gains.
That happens because the S&P 500 is weighted by market capitalization. When the biggest stocks (those with the largest market cap) all have a sudden move up at once, the index rises.
What happens if we look at the S&P 500 and equal weight all of the stocks? A very different picture. There’s an ETF for that: The Guggenheim S&P 500 Equal Weight ETF (RSP) is up 1.1 percent for the month.
That is exactly half the gain of the regular S&P 500.