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Is the Era of Mega-Cap Tech Stocks Coming to an End?

Updated: May 15

Mega-Cap Tech

  1. The seven mega-cap tech names that have driven the majority of the market’s gains have hit a roadblock (see chart below). Nonetheless, these stocks have carried the S&P 500 so far in 2023, while the average stock is still negative for the year, as measured by the Equal Weight Index.

  2. Rising rates put a damper on the performance of these names since their August highs. The Fed’s ‘Higher for Longer’ policy for interest rates, make growth companies less attractive as the ‘risk free rate’ for calculating return expectations looks more attractive and cost of capital for these companies can have a drag on margins.

  3. The market’s failure to broaden have given investors second thoughts on where to allocate capital. For the last decade, the acronym T.I.N.A. has been thrown around (there is no alternative) in reference to stock investing vs. bond investing. However, now that rates are higher, there is an alternative. Investors can how allocation portions of their portfolio to fixed income and have better expectations for growth as even treasuries are around 5% yields.


Index return information is provided for illustrative purposes only. Index returns do not represent investment returns or the results of actual trading nor are they forecasts of expected gains or losses a fund might experience. Index returns reflect general market results, assume the reinvestment of dividends and other distributions, and do not reflect deduction for fees, expenses or taxes applicable to an actual investment. An index is unmanaged and not available for direct investment. Past performance does not guarantee future results.

The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value-weighted index with each stock's weight in the Index proportionate to its market value.



The S&P 500 index rose 2.2% this week, extending the market benchmark's winning streak to a third week, as investors were encouraged by cooler-than-expected October inflation data and stronger-than-expected quarterly results from some retailers. The S&P 500 ended the week at 4,514.02, up from last Friday's closing level of 4,415.24, putting the S&P 500 on track for its largest monthly gain this year if it can sustain the climb through the end of the month.

The advance came as economic data showed consumer prices as well as producer prices were tamer than expected last month, helping ease investors' worries about inflation and interest rate increases.  The data showed US seasonally adjusted consumer price index, a closely followed measure of inflation, slowed to a flat reading in October, missing expectations for a 0.1% gain. Core CPI, which excludes food and energy prices, rose by 0.2%, smaller than the consensus estimate for a 0.3% increase.

The US producer price index, meanwhile, fell 0.5% sequentially last month on a seasonally adjusted basis when a 0.1% increase was expected. Excluding food and energy, monthly PPI was flat month over month after rising 0.2% in September and was below the 0.3% gain analysts had modeled.



Economic data expected this week is expected to be a lighter week due to the Thanksgiving Day holiday on Thursday. The US stock market will be closed all day and will close early on Friday.

Economic reports anticipated ahead of the holiday-related closures include October US leading economic indicators on Monday, October existing home sales on Tuesday, and October durable goods orders on Wednesday. Also, minutes from the latest Federal Open Market Committee meeting will be released on Tuesday.

Major Companies Reporting Earnings: NVIDIA, Lowe’s Companies, Medtronic, Deere & Co., Johnson Controls. 

Source: Ycharts


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