The S&P 500 is up 21% year-to-date. “Wait, what?” you is likely to be pondering. Yep, it’s true. 21%. This quantity may not shock index fund holders, but it surely’s prone to stun particular person inventory pickers. The S&P 500 is outperforming 73% of the inventory within the index!

Seven lethal shares are driving an Andre the Large-sized gap via the efficiency of the S&P 500 and the efficiency of the S&P 493. The magnificent 7 are up 105% year-to-date whereas the S&P 493 are up simply 7%.

This stunning disparity, and I don’t imply to downplay it, is rather less stunning whenever you zoom out. Mega cap tech acquired destroyed in 2022. These had been a number of the peak-to-trough declines:

• Google -46%
• Amazon -56%
• Nvidia -66%
• Fb -77%

An equal-weighted magazine 7 portfolio had a 48% drawdown in 2022 that bottomed two days earlier than the brand new yr. So to not take something away from the spectacular run, however you possibly can’t discuss 2023 with out 2022. During the last two years, the magnificent 7 has barely overwhelmed the S&P 500.

The query going ahead is, is that this unhealthy? Like, what follows slim management? Traditionally, it’s not nice. The subsequent chart exhibits earlier intervals of maximum outperformance of the cap-weighted index over the equal-weighted one. 1973, 1990, 1999, 2020, and now as we speak. Yikes.

Solely 4 earlier examples of this hardly supplies us with any conclusive proof, however nonetheless I believed this was attention-grabbing. The chart beneath exhibits a greater depiction of 1-year ahead S&P 500 returns (in pink) following a yr of narrowing management. Not nice, not all unhealthy both.

Josh and I lined this and far more on an unimaginable episode of The Compound & Associates with the good Dr. David Kelly of JP Morgan.