The Five Largest Stocks Account For 42% Of The Nasdaq, And Why Goldman Clients Are Concerned

With the Nasdaq 100 index making new record highs on practically every day of 2017, and returning 32% during the past 12 months vs. “only” 19% for the S&P 500, Goldman’s clients are starting to  get concerned. And, as Goldman’s David Kostin writes in his latest weekly letter, increasingly nervous investors are asking “whether NDX outperformance will continue.”

Some facts: “100 of the largest stocks in the composite index, reached an all-time high [Friday] (5646), along with the S&P 500 (2399). Information Technology is the best performing sector YTD in both absolute and risk-adjusted terms and has led both indices. Technology accounts for 58% of NDX versus 23% of the S&P 500 and largely explains the 870 bp YTD outperformance (16% vs. 7%; see Exhibit 1).”

While Kostin provides some details about his outlook for the relative performance of the S&P and Nasdaq, what is most notable about the recent disconnect between the broader market and the tech heavy index, is just how concentrated the Nasdaq has become.

As Goldman shows in the chart below, the Nasdaq is so concentrated at the stock-level, the five largest stocks comprising 42% of the index compared with 13% of S&P 500….

Source: The Five Largest Stocks Account For 42% Of The Nasdaq, And Why Goldman Clients Are Concerned | Zero Hedge

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