Call them the Supersized Six.
Microsoft, Amazon, Apple, Alphabet, Facebook and Berkshire Hathaway — six of the most highly valued companies in the S&P 500 — don’t just boast the index’s biggest market caps.
In fact, those six companies are worth about as much as the bottom 290 companies in the S&P combined. Taken together, their market caps total $4.2 trillion, while the bottom 290 S&P companies are worth roughly $4.3 trillion.
It’s fairly common knowledge that the top 50 S&P stocks are worth more than the bottom 450, and it’s not unusual that the market is frequently this “top-heavy,” says Carter Worth, chief market technician at Cornerstone Macro.
But the concentration in these six names is noteworthy, and it could mean trouble for the market, Worth said Tuesday on CNBC’s “Fast Money.”
Considering the influence they have over the S&P’s direction, it makes you wonder: “Is it an index, or is it a few big names that drive everything?” Worth said. “That’s what makes beating the index so hard.”
He called attention to this chart tracking the six-stock basket against its 150-day moving average, as well as the number of times it has traded above or below that average.
“Literally, every single time we have gotten this far above the 150-day moving average, we have peaked. It is right at that level yet again,” Worth said, pointing to the uptick in the bottom panel’s trend line. “So, as this goes, so goes the market. I think you’ve got a crowding that’s not so good. Just to put it in real context, think of those six names relative to the S&P. It’s all so dependent on these big names.”
Moreover, while the market’s “heavy hitters” have made up 15% of the S&P’s total market cap, on average, since at least the 1990s, that percentage is also ticking up, Worth noted.
“We’re starting to get back to a level that is typically indicative of when markets peak. That’s ’07, so forth and so on,” he said. “None of this is particularly healthy.”
By market cap, Microsoft is worth about $963 billion, Amazon is worth $949 billion, Apple is worth $969 billion, Facebook is worth $540 billion, and Berkshire Hathaway is worth $515 billion.
The broader market mounted a recovery Wednesday, with the S&P lifting off its Tuesday lows early in the session.