Since the market lows in March, large technology stocks have roared back and pushed market indices into gains as people and businesses used more technology in a COVID world. However, the rest of the stock market has not fared as well. In today’s post, I would like to share a “thought of the week” released today by JP Morgan, one of the Portfolio Strategists we utilize for client accounts, about whether this may be now changing .
Over the past weeks, investors received welcome news on the development of vaccines against COVID-19, which has led to a powerful rotation in markets. Through October of this year, the 5 largest names in the S&P 500 by market capitalization, which are mega-tech companies, returned 38.6% in the year and remarkably outperformed the rest of the index, which was down -4.8% during the same period. However, the vaccine optimism has led markets to look beyond the pandemic, and cyclical sectors that were depressed for most of 2020 have recovered. As shown in this week’s chart, the top 5 stocks are now down 2.1% since early November, trailing the S&P 500, which has returned 4.4%. While the recent news around the vaccines is positive, we are still not out of the woods. There are crucial hurdles to overcome until the population is immunized, so volatility in markets will likely remain and a well-balanced approach is still warranted.