As the coronavirus stock market rally continues, growth has made a powerful return—
particularly in tech. Large-cap tech companies such as Apple (AAPL), Microsoft (MSFT),
Amazon (AMZN), Alphabet (GOOG), Facebook (FB), and Tesla (TSLA) have seen
astronomical strides this year despite the global pandemic, with growth ranging from 16%
(Alphabet) to 279% (Tesla). Growth has resounded in mid-cap tech companies as well. Among
Nvidia (NVDA), Paypal (PYPL), Zoom (ZM), and Netflix (NFLX), growth ranges from 52%
(Netflix) to 284% (Zoom) this year. [1]
Tech now holds an unprecedentedly large role in stock market indexes. Apple, Microsoft,
Amazon, Alphabet, Facebook, and Tesla now hold a collective 49% of the value of the Nasdaq
100. These tech stocks (Tesla omitted) now also hold 22% of the value of the S&P 500,
compared to 17.5% six months ago. 1 As Tesla releases Q2 earnings reports, bullish investors
speculate that Tesla may be added to the S&P 500, forcing passive investors in index-tracking
funds (e.g. ETFs) to buy Tesla shares, and boosting share prices even further.[2]
While tech gains have led to rapid growth in equity, investors should also be cautious of new
risks. Tech-heavy indexes might have limited upside due to concentration in one sector, and
index-heavy portfolios could potentially see greater losses from pullbacks in the tech. As per
usual, investors should continue to look for growth trends while exercising proper caution.
For more information on how to navigate the tech rally, give our office a call at (631) 393-2888 or
tune into my daily economic update at 7:20 AM on 103.9 FM.
The Nasdaq 100 is a stock market index comprised of 103 equity securities issued by 100 of the largest non-financial companies
listed on the Nasdaq stock market. You cannot directly invest in this index.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be
representative of the stock market in general. You cannot directly invest in this index.
Craig J. Ferrantino is a Registered Representative offering Securities and Advisory Services through
UNITED PLANNERS FINANCIAL SERVICES, Member FINRA, SIPC. Craig James Financial Services, LLC and United
Planners are not affiliated.
1 Levy, Ari. “These Six Stocks Now Make up Half the Value of the Nasdaq 100.” CNBC 22 July 2020. Web.
<https://www.cnbc.com/2020/07/22/these-six-tech-stocks-make-up-half-the-nasdaq-100s-value.html>
2 O’Halloran, Suzanne. “Why Tesla Stock is S&P 500 Bound.” Fox Business. 22 July 2020. Web.
<https://www.foxbusiness.com/markets/why-tesla-is-sp-bound>