Through July 25th, the YTD total return of the S&P 500 was 7.6%, which is an annualized equivalent of 13.7%.
At first glance, there’s nothing particularly remarkable about this return; it’s well within the range of historical averages.
One of its noteworthy characteristics, however, is the relatively small number of constituents that are making any meaningful contribution to it.
Five stocks (1%) make up nearly half the return, 10 stocks (2%) account for nearly two-thirds of it and 25 stocks (5%) have generated almost 90% of it.
With 500 constituents, the S&P 500 is considered broadly diversified. In reality, it’s dominated by a small subset.
A risk of the breadth of contributors being so narrow is that the few that have led the way up, can also quickly reverse course and lead the way down.
Unless otherwise noted, data is sourced from Bloomberg.
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