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Concentration Works Both Ways

Ian Tam analyzes the U.S. and Canadian recoveries and discovers something interesting.

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Ian Tam: Despite a bleak economic outlook, in August, the S&P 500 not only recovered from the COVID-19 dip, but it's actually surpassed its previous highs. Many say that this is due to the outperformance of technology stocks. Today, we'll have a look at how true that actually is.

This first chart shows the five stocks that make up almost 25% or a quarter of the S&P 500 Index. These stocks include Apple, Facebook, Amazon, Google, and Microsoft. To understand the impact of these stocks on the index's performance, I use Morningstar CPMS to run a back test with the intent of replicating the index but without these five stocks.

Ian Tam does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.