Clients always ask, “how are the markets doing?” It might seem like an easy question to answer—up, down, sideways?— but it’s usually much more  complicated. We’ll get back to that. Let’s focus on today’s US equity markets: it’s been a strong year so far. After all, the S&P 500 is up around 9%, and the Nasdaq has gained over 16%. That’s nice. But look under the hood and there are some interesting characteristics of recent performance. In particular, we want to highlight the impact of the “FAAMG” stocks: Facebook, Apple, Amazon, Microsoft, and Google. Together, these names are about 13% of the S&P 500 and have a combined market cap of—brace yourself–$2.9 trillion.

These stocks are all up between 15% (Microsoft) and 38% (Facebook) this year, driving the performance of the overall indices that they’re in. According to Goldman Sachs, these five accounted for 37% of the rise in the S&P 500, and a whopping 55% of the Nasdaq’s increase as of June 7.

To see why it’s complicated to discuss “the markets”, consider that the S&P 500 Value index, which does not contain any of the FAAMG stocks, is up a meager 4% this year. That’s less than half of the broad S&P 500 index.

As we move into the second half, investors are increasingly wondering if this leadership is sustainable: the difference in returns between these tech giants, and the rest of the market has grown wide…best to mind the gap.

Source: Bloomberg