There have been some incredible earnings reports this quarter that have helped the bull market continue its unprecedented rally, but is the market really that strong?
According to CNBC:
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.
In other words, its not the stock market as a whole that is strong, but a very small clique of massive tech companies. Amazon, Apple, Alphabet (Google), Facebook and Microsoft have single handedly dragged the markets up as they continue their staggeringly successful years.
This tells us two things. The first is the fact that these companies are powerful and influential enough to affect the markets this way is a sign of just how valuable their stocks are. The second and more frightening thing is that if one of these companies hit a major snag and their stock went down, it could pull the entire market down with it.
Investors and analysts will have to get used to this new reality. One could argue that we have not seen anything like this since the monopolistic companies of America’s Gilded Age, with the likes of Standard Oil and U.S. Steel buoying the markets with their performance.
Investors should be sure to stay up to date with the latest news coming out of these companies even if they do not own them. The fact is that big tech now runs the markets, and investors will win or lose depending on how they perform.
To read CNBC’s article on big tech’s effect on the market, click here.
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