There’s been quite a bit of debate about what’s driving the rather unexpected stock market rebound in the midst of a global pandemic (e.g., Fed actions/policies, stimulus, large businesses benefiting at the expense of small businesses, some business models are benefiting from the new norms at the expense of those that don’t, etc.).
In my view, it’s probably a bit of each of those, but dominated by the sad fact that a large cross-section of non-public small and medium businesses will not survive, and large public companies that can weather the storm will ultimately be able to fill the supply void, and even buy their assets/IP for pennies on the dollar.
Case in point – my dad never used Amazon until a few months ago, and previously spread his retail purchases across a diverse group of businesses. I don’t think he’ll ever look back.
I’ve seen several articles suggesting the entire rebound has been led by the handful of technology firms that have out sized weight in the S&P 500 index, and that the value of rest of the companies in the index are down YTD. And while this is kind of true if you average a lot together, it’s a bit misleading.
So I was pleased to see this thoughtful visualization that my friend Robin shared recently:
It of course depicts the strong out performance of the large tech firms – Apple up 60% and Amazon 80% YTD – but it also very intuitively shows the nuance across different sectors and their relative importance to the overall market.