Equities have rebounded this year, with the S&P 500 enjoying a 17% rally in the first half of the year. Yet,
🔸 The construction of the S&P 500 index is hiding a huge divergence in individual stock and sector performance. The rally led by tech, ex-Big 4/5, now Magnificent 7 (Microsoft, Nvidia, Google, Apple, Meta, Amazon, Tesla), left “old(fashioned)” sectors behind.
🔸 Coatue collected data shows that Magnificent 7 accounted for ~85% of the S&P 500 return, while the other 493 companies barely contributed.
🔸 Many stocks lagged the broader index, with the energy sector underperforming the most, followed by financials, healthcare, and staples. The only up sectors were industrials & materials and real estate.
🔸 The enthusiasm for the tech rally is partly fueled by the anticipation of potential AI applications that could save OPEX and increase profit margins.
🔸 Performance divergence between equal-weighted and capitalization-weighted (usually more concentrated) indices has been strong this year, surpassing even 2000 tech boom levels.
Source: Coatue
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