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Must Read: The S&P 500's Wild Ride

The stock market's intricate dance is a tale of rises, falls, and the powerhouse players who often steer its direction. In this analysis, we dive deep into the S&P 500's recent performance, with a spotlight on the 'Magnificent 7' - a group of dominant tech and innovation giants - and their remarkable impact on 2023's market returns.

A cowboy getting bucked.
S&P 500's Wild Ride

The Magnificent 7 in 2023

In 2023, the S&P 500 as represented by SPDR S&P 500 ETF Trust (ticker: SPY) has risen by 13.81% as of 9/22/23. The 'Magnificent 7' stocks have been central to driving this market rise,

contributing a combined 10.08% to the index's YTD return. This indicates that these titans have accounted for a staggering 72.95% of the total S&P 500 return for the year. However, outside of these influential giants, the broader market contributed a more modest 3.73% to the S&P 500's ascent.

Not So Magnificent Last Year

Before celebrating 2023's recovery, it's essential to understand the hurdles of 2022. The S&P 500 experienced a significant contraction, shrinking by 18.17%. Among some of the biggest decliners were the 'Magnificent 7':

  • Apple: -26.40%

  • Amazon: -49.62%

  • Microsoft: -28.02%

  • Tesla: -65.03%

  • Meta: -64.22%

  • NVIDIA: -50.27%

  • Alphabet A & C: Averaging a decline around -39%

After a downturn, how do the index and individual stocks fare in their quest to regain lost ground?

Still Not Back to Even

To neutralize the 18.17% loss of 2022, the S&P 500 needs to rise of 22.22%. Despite the 13.81% uptick in 2023, the index hasn't yet returned to its previous peak. Here's a look at the 2022 and 2023 sequence of returns for the 'Magnificent 7':

  • Apple: Short by 0.77% of the needed recovery.

  • Amazon: Still in deficit by a notable 45.14%.

  • Microsoft: Lags behind by 5.83%.

  • Tesla: Falls short by a significant 86.99%.

  • Meta: A 30.81% gap remains.

  • NVIDIA: The standout surpassed the break-even by 84.29%.

  • Alphabet (A & C): Both classes trail by around 16%.

Except for NVIDIA, the other six entities, while posting positive numbers, haven't completely offset their 2022 downturns.


Will the S&P 500 get back to even this year?

  • Yes

  • No

Conclusion

The S&P 500's two-year narrative unveils a story of dominance by a few key players and the ongoing journey of recovery. For investors aiming to mirror the S&P 500's performance, two primary lessons emerge. Firstly, possession of the 'Magnificent 7' is essential, though it comes coupled with a rollercoaster of huge highs and lows. Secondly, to walk in tandem with the S&P 500's footsteps, one must have the mettle to endure a level of volatility that might exceed their comfort zone or tolerance for loss. Ultimately, it's worth noting that a well-diversified portfolio may not always mimic the S&P 500, underlining the importance of tailoring investment strategies to individual goals and risk appetites. As we venture forward, the performance of both the 'Magnificent 7' and the broader market will continue to shape the dynamics of market versus portfolio performance.


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Unless otherwise indicated all performance is sourced from Bloomberg.

Disclosure

The views presented are those of the authors and webinar or podcast hosts/participants, and should not be construed as investment advice. The authors, podcast participants, webinar hosts, or clients of WBI Investments, LLC (WBI) may own stock discussed in these insights. WBl is an investment adviser in New Jersey. WBl is registered with the Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. WBl only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of WBI's current written disclosure brochure filed with the SEC which discusses among other things, WBI's business practices, services and fees, is available through the SEC's website at: www.adviserinfo.sec.gov. This site contains links to third-party websites. WBl does not endorse, approve, certify, or control these websites and does not assume responsibility for the accuracy, completeness, or timeliness of the information located there. Your access to and use of such websites is governed by the terms of use and privacy policies of those sites, and shall be at your own risk. WBI disclaims responsibility for the privacy policies and customer information practices of third-party internet websites.

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