Tech companies as a whole make up almost 40% of the value of the index …
The WSJ reports.
Technology companies are set to end the year with their greatest share of the stock market ever, topping a dot-com era peak in the latest illustration of their growing influence on global consumers.
Companies that do everything from manufacturing phones to operating social-media platforms now account for nearly 40% of the S&P 500, on pace to eclipse a record of 37% from 1999, according to a Dow Jones Market Data analysis of annual market-value data going back 30 years. Apple, which earlier this year became the first U.S. company to hit a $2 trillion market capitalization, accounts for more than 7% of the index on its own.
The S&P gained nearly 8% this year despite the coronavirus crisis thanks in large part to tech companies seeing increased demand for their products as more people work from home and seek home-based entertainment.
Some do worry about a repetition of the dotcom bubble.
Previous peaks in a sector’s influence over the S&P 500 have preceded selloffs. The tech sector tumbled after the dot-com bubble burst. Banks’ influence over markets peaked in 2006 ahead of the financial crisis, and energy stocks slid after hitting a new high in their share of the index in 2008.
Few analysts say tech stocks are as overvalued as they were two decades ago, with sturdy earnings growth and near-zero interest rates justifying much of the group’s recent ascent. But many investors are bracing for more volatility in a sector that has risen remarkably quickly and pulled the rest of the market along with it.
However, billionaire Warren Buffet has described investment funds which mirror the S&P 500 to be a good basis for long-term investment.
“Consistently buy an S&P 500 low-cost index fund,” Warren Buffett told CNBC’s On The Money in an interview recently. “I think it’s the thing that makes the most sense practically all of the time.”
And he suggests staying the course, despite market fluctuations. “Keep buying it through thick and thin, and especially through thin,” the chairman and CEO of Berkshire Hathaway said with a laugh […]
Buffett says an index fund is a way to avoid the risk of picking individual stocks. “The trick is not to pick the right company, the trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low cost way,” he added.
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