The S&P 500's reliance on a few winning stocks is getting worse

By Joy Wiltermuth

S&P 500's performance in the second quarter would be negative without these 10 stocks

U.S. stocks on Monday added to a blistering rally in 2024 - for a select group of winning stocks.

The S&P 500 index SPX has climbed to a series of record highs this year, despite worries about frothy valuations and big gains in only a few megacap technology stocks.

But instead of a broadening rally, as investors expected the Federal Reserve to signal plans to pivot to rate cuts this year, concentration risks actually deepened in the second quarter, according to Emily Roland and Matt Miskin, John Hancock Investment Management's co-chief investment strategists, in their latest weekly client note.

The strategists put together two charts, one showing a breakdown of the S&P 500's 15.29% total return so far this year.

It shows the following 10 companies accounted for 73% of that gain so far this year:

Nvidia Corp. NVDA Microsoft Corp. MSFTAmazon.com Inc. XE:AMZ Meta Platforms Inc. METAEli Lilly & Co LLY Alphabet Inc. GOOG GOOGL Apple Inc. AAPLBroadcom Inc. AVGO Berkshire Hathaway Inc. BRK.B JP Morgan Chase & Co. JPM

The second chart breaks down the S&P 500's 4.28% climb in the second quarter. It also shows how the quarter's top 10 stocks actually gained 5.60%, implying other stocks in the index were negative in the aggregate.

While there was considerable overlap between the year's top 10 stocks and the second-quarter's top gainers, Tesla Inc. (TSLA), Costco Wholesale Corp. (COST) and Qualcomm Inc. (QCOM) shares also helped drive the index higher ahead of mid-year.

"In reviewing Q2, the concentration became more extreme and market breadth harder to find," the strategists wrote.

The Nasdaq Composite Index COMP booked a fresh record close on Monday, while the Dow Jones Industrial Average DJIA gained 0.1% and the S&P 500 rose 0.3%, according to FactSet.

-Joy Wiltermuth

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07-02-24 0715ET

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