Even though the big firms in the S&P 500 have done well, the market has actually had broad based improvement. The equal weighted S&P 500 was up 1.67% in the first half.

Firstly, there are always leaders in the market. It’s usually good to have the fastest growing firms leading the market because if the value stocks with low growth are the leaders, it generally means the market is in ‘risk off’ mode and possibly going lower. Secondly, this is a misleading assumption because there are many stocks in the index which are down. You could add up all the stocks which have increased in the index and it will lead to much more than 122% of the gains.

The way you can understand how this is misleading is that the equal weighted S&P 500 was up 1.67% in the first half, while the normal market cap weighted index was up 2.52%. If only the top firms provided the gains, how come an equal weighted index, which isn’t bolstered as much by the big cap firms like Amazon, Facebook, Microsoft, and Google, did nearly as well? It’s because the gains were broad based.

Are Top 10 Companies The Reason Behind Market Growth?

Submitted July 05, 2018 at 11:53PM by AlexPitti https://ift.tt/2KSnxPG