The S&P 500 is on a tear and more and more investors are pouring into the market, afraid to miss out on additional gains. But there is more to the S&P 500’s record run than meets the eye. Technology stocks are doing well but there are dozens of one-time bellwether stocks that are in bear market territory. This suggests the U.S. economy is not as robust as many think it is. And it should give investors pause.
We are officially in the longest bull market ever. Since the stock market bottomed in March 2009, the NYSE has advanced 210%, the tech heavy NASDAQ is up a whopping 512%, and the S&P 500 has soared 335%. Meanwhile, the TSX has enjoyed a 115% run.
While these numbers are certainly worth celebrating, it’s also a double-edged sword. It means the markets are responding to solid economic data. But because the markets are cyclical, a record run also means a stock market correction is long overdue.
Overweight Tech Stocks Carrying S&P 500
We’re in a comfortable bull market. But the bull market is being supported by big technology stocks. The S&P 500 is near record territory and is up an impressive 14% since hitting its low for the year in early February.
What most investors don’t realize though is that the technology sector makes up 26% of the S&P 500. This is the strongest weighting since it peaked at 29% in 2000. Including Amazon (NASDAQ:AMZN), the tech industry represents a bigger part of the S&P 500 than it did when the internet bubble peaked in 2000.
Technology stocks are behind more than half of the gains the S&P 500 has realized this year. A year in which Apple (NASDAQ:AAPL) and Amazon have become the first companies to have market caps of $1 trillion.
It’s not just Apple and Amazon that are doing well, the S&P North American Technology Sector Index ETF is up an impressive 24% since the start of 2018.
Trade Tension Has Other Big-Name Stocks Struggling
But, within those rosy technology numbers, there is a disturbing trend. Outside of technology, some big stocks are struggling.
• Harley Davidson, Inc. (NYSE:HOG) is down 16% year-to-date
• Goodyear (NASDAQ:GT) is down 31%
• Ford Motor Company (NYSE:F) is off 28%
• General Electric (NYSE:GE) has fallen 27%
• Stanley Black & Decker (NASDQ:SWK) is down 15.9%
• Whirlpool Corp. (NASDAQ:WHR) has tumbled 33.7%
These, and many more household names have missed out on the big gains technology stocks have made because trade tensions and raised costs have but into profits, forced them to quit projects, and dimmed their outlooks.
A large number of stocks, like traditional bricks-and-mortar retailers and consumer defensive stocks, which have little to do with trade, have being struggling with industry pressures.
All of this goes to show that you can’t judge the current bull market solely by looking at the charts. There’s a lot more to the picture.
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