Economy 5 Biggest fang stocks now comprise 18 percent of the S&P valuation

Wall Street getting a bit concerned over the massive valuations of the top 5 technology stocks. Even though they are extremely profitable companies with good business Wall Street worries if any one were to sink. They see that also the rapid rise of other stocks give a bit of a feeling of a bubble again.

In the case of the top 5 Apple, Microsoft, Alphabet, Facebook, Amazon all told 18 percent of the S&P valuation.

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• Apple, Microsoft, Alphabet, Amazon and Facebook make up 18% of the total market cap of the S&P 500, an unprecedented level of dominance, according to Morgan Stanley.
• When Apple has claimed more than 4% of the S&P 500 market cap in the past, the stock underperformed by nearly 9% on average in the next 12 months, said Leuthold Group analyst Phil Segner.
• Bank of America is warning of the "rising correlation and concentration risks" in the market.
• As these tech giants' market caps ballooned to record highs, their income contribution to the broad market decreased in recent years, a red flag for the stock prices, Morgan Stanley said."

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It's no secret that a handful of tech giants have been dominating the stock market, but their leadership has reached a level that is raising eyebrows on Wall Street as being unsustainable.

The top five U.S. companies — Apple, Microsoft, Alphabet, Amazon and Facebook — now make up 18% of the total market capitalization of the S&P 500, the highest percentage in history, according to Morgan Stanley."


https://www.google.com/amp/s/www.cn...arfing-the-market-at-unprecedented-level.html

 

What's the worry? They are too big to fail, and dont have to pay taxes at all. There is no risk.

Remember, socialism for the rich, austerity for the poor

 

I get the concern, but that is the reality of a changing future.

 

The issue is a lot of these valuations are not about what the US does but what India and China does in the future. Ether situation is hardly assured and many elements could cause them to take a substantial drop. Right now India has been dragging their feet on Apple and Apple just agreed to build a plant in India to make the lower cost versions of the Apple Iphone. China seems to be less dependent on the Iphone as their own brands seem to be gaining traction. What plus Apple has is their media arm and their watches are doing very well like really really well in China. What people originally thought that the watch was never going to takeoff has become a must have for many Chinese helping to keep sales of the higher priced Iphone models such as the 11 in China. But make no mistake their profit margins are shrinking and Chinese people are holding on to their phones longer. That points to Apple needing more services revenue from their media arms such as Itunes and App Store.


Microsoft situation maybe better off because they have been doing great business with their cloud services overseas and gaming is huge overseas even with Sony dominate place in that space. XBox offers the massive Microsoft ecosystem to help it's place. But all these things could change with the political climate and the growing demand on locally built products. These things are what keep Wall Street up at night never mind Google or Facebook or Amazon. Amazon is huge in India like really popular and growing like no ones businesses thanks to Bezoes good relationship with India PM Modi.

EDIT: I wanted to add Tesla you almost feel bad for US employees as Tesla enters the Chinese market. Elon is all in on China will build and engineering center to design a world car and will open a software development lab too.

 

But America will be at the forefront of emerging technologies like quantum computing for instance. The revolutions that come from breakthroughs in that field will be world changing.

It’s going to be hard for us to be a manufacturing country again (at least for some products which Asia is already outfitted for). Part of this is due to China’s theft of IP, and also because they are running a giant shell game.

For instance, I just bought a product. It’s originally from a well known manufacturer who builds in China. It’s normally $200 (I could build it myself for maybe $50). China turns around and sells the same product in a different case for $25 shipped to your door from China. It’s impossible to fight that. It cost more than that just to ship a small box to China.


So, we have to do what we do best, innovation. And if we could straighten out the shitshow that is our politics, prepare for the future.

 

the proportion of Institutional Investors in many of those FAANG stocks concerns me as well

Whole national banks are buoyed by holding these stocks, just look at the Swiss National Bank's holdings
https://whalewisdom.com/filer/swiss-national-bank#tabholdings_tab_link