Investing
Through it all, stocks are still up on the year
If you just looked at the surface of S&P 500 portfolio returns since the start of this year, you may have missed the bank system turmoil of the past few weeks.
If you just looked at the surface of S&P 500 portfolio returns since the start of this year, you may have missed the bank system turmoil of the past few weeks. Year-to-date, the broad stock market index has returned investors +4%.
The index has held onto that gain despite bank stocks plummeting -20% this year (pummeled by the first bank warning sign on March 8th). Under the surface, the broad market resilience can be largely explained by the strong run in technology stocks, which have returned investors +16% over the same time period.
Take a closer look: Tech has been propping up the market, but overall sentiment is fragile
Within equities, investors seem to be gravitating towards companies with flush balance sheets and strong management teams amid the turbulence – a handful of companies fitting that description happen to live in the technology sector (think Apple, whose stock is up +20% this year, or Microsoft +15%). The tech sector alone holds a roughly 25% weight to the S&P 500, and that weight increases when you add in tech-adjacent stocks like Amazon (+15%), Meta (+66%), and Alphabet (+14%). Meanwhile, financials represent just 13% of the index.
Looking ahead, we do expect heightened volatility across the board. That’s why our highest conviction idea is still to consider adding core fixed income for income generation and portfolio protection potential in the event of another market downturn. With recession risks still on the rise, we think the best offense is a good defense in portfolios.
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Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941–43 base period.
Standard and Poor’s 500 Information Technology Index comprises those companies included in the S&P 500 that are classified as members of the GICS information technology sector.
The Nasdaq-100 is a stock market index made up of 101 equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock market. It is a modified capitalization-weighted index. The stocks' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components.
Small capitalization companies typically carry more risk than well-established "blue-chip" companies since smaller companies can carry a higher degree of market volatility than most large cap and/or blue-chip companies.
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