Now I don’t think we need much of a background with the current situation, so I’m just going to sum things up very quickly from an investment standpoint, since a lot of this is self explanatory and in the beginning of March, almost every major economy went into a mandatory shut down where people were advised to stay home, business were forced to shut down and for most part everything came to screeching halt.
This is what many people faxed to the scary realization that they might not have a job to return to and that many business are forced to permanently shut down and depending on how long the stay at home orders are in effect.
We can be in for a very severe economic mess by the time all of this is over, this caused a widespread stock market panic as we saw some of our single worst days ever in history, we had multiple stock market crash as a major sell off continued and that left us all wondering how much worst can things get.
To help solve this economic fail, the Federal Reserve stepped in and the largest stimulus ever was passed at 3 trillion dollars and since then the stock market have seen a rather fast increase leaving a lot of people to feel like they’re mussed the boat, and remember just 2 months ago countries like this were a dime to dozen and a lot of people talked about the S&P 500 hitting to 2000 or even 1700, and for every one article with an optimistic view there were dozens of others painting a devastating picture, even now companies like JP Morgan are warning that the stock market momentum might soon be slowing down. So in order to determine exactly what’s going on especially because so many companies have being hit incredibly hard.
Let’s look into this a little bit further and I’m going to be showing you what’s really driving all of this growth because trust me I have a feeling it’s but what you’d expect, so we’re going to begin by looking at the SnP 500 which is an index that tracks the top 500 publishing traded companies here in the United States and it’s waited overall by the companies market value, so the more valuable a company is, the more it can influence the entire price of the SnP 500, Now this is really important for me to mention because of the 500 publically traded companies out there, only 6 of them make up 25% of its entire value.
And those companies are facebook, amazon, Netflix, apple, google and Microsoft then the other 494 companies make up just 5%. Now it’s even more interesting us that if we look at every single company within the SnP 500, you’re to date we can see that 395 of them have lost value it the remaining 110 have seen a moderate game since the beginning of the year, so if 3 out of 4 companies have lost money then why he the SnP 500 going up in value?
Well that’s because the few remains companies that are doing well are doing really well and they’re becoming very valuable, just this year, Microsoft is up over 16%, Apple is up over 8%, amazon is up almost 32%, facebook is up almost 15%, google is up over 5% and while we’re all gone just chilling Netflix is up 32%.
So given that all of those companies are online and doing exceptionally well during a time where we’re all online, it’s not surprising that a lot of the growth is driven only by a few companies who were set up perfectly for a time like this.
Anyway that’s why the SnP 500 have risen so much, while the majority of the SnP 500 is at a loss for the year, this growth is driven by some of the largest and most powerful companies in existence who have made themselves invaluable during a time where most of us are not leaving the house, which let’s be real if you could start a business or a service, the people could use without leaving their bed, it’s basically a licence to free money, as to whether or not this is concerning to you as an investor is yet to be seen since technically when you go and buy an index fund, you’re rest placing a significant portion of your money within a few very large companies but it’s important that if you go and invest in the SnP 500 or really any index fund for that matter, that you really understand where exactly your money is being invested and where it’s going so you’re not caught off guard.
Another company just recently analyzed that all if these finding Just speaks for themselves, these stuck have by far outpace and exceded the entire growth of the rest of the stock market and over tines, they’re becoming increasingly valuable.
This just means that it could most likely become the new normal as a fair very large companies lead the entire stock market as they’re able to reach billions of people with the power of the internet and I think this type of growth is going to become more common as we become more and more centralized online and with technology. Not to mention if Tesla gets included into the SnP 500 by the end of the year.